Moral hazard, dividends, and risk in banks

Enrico Onali

No 12001, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: The relation between dividends and bank soundness has recently drawn much attention from both academics and policy makers. However, the existing literature lacks an investigation of the relation between dividends and bank risk taking. I find a positive relation between default risk and payout ratios, although this relation is insignificant for very high levels of default risk. Capital requirements and the desire to preserve the charter can offset the positive relation between default risk and payout ratios. Dividends can increase despite very high default risk, and during the recent financial crisis many banks paid out dividends after recording a loss.

Keywords: dividend; bank risk; moral hazard (search for similar items in EconPapers)
JEL-codes: G21 G35 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cta and nep-rmg
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Moral Hazard, Dividends, and Risk in Banks (2014)
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