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Financial Market - 2023 - Alhalabi - Bank dividend payout policy and debt seniority Evidence from US Banks.pdf (602.28 kB)

Bank dividend payout policy and debt seniority: Evidence from US Banks

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posted on 2023-11-17, 13:55 authored by Thaer Alhalabi, Vitor CastroVitor Castro, Justine WoodJustine Wood

Bank depositors and creditors are expected to play an important role in banks’ dividend policy since they can either discipline or incentivise managers to pay larger dividends. We provide evidence suggesting that depositors are more influential than subordinated debtholders in disciplining risky banks from wealth expropriation, which is consistent with the monitoring hypothesis. The results for the average behaviour of banks show that deposits and subordinated debt explain larger dividends, suggesting that signalling incentives drive these cash payments. Diving deeper into our groups of banks, we observe that the risk-shifting hypothesis becomes more nuanced as listed banks exercise wealth expropriation after the crisis through the uninsured deposits channel. Our results provide significant support for major dividend theories, unravelling the debt channels through which these theories may hold.

History

School

  • Loughborough Business School

Published in

Financial Markets, Institutions and Instruments

Volume

32

Issue

5

Pages

285-340

Publisher

Wiley

Version

  • VoR (Version of Record)

Rights holder

© New York University Salomon Center

Publisher statement

This is an Open Access Article. It is published by Wiley under the Creative Commons Attribution 4.0 International Licence (CC BY). Full details of this licence are available at: https://creativecommons.org/licenses/by/4.0/

Acceptance date

2023-07-27

Publication date

2023-08-07

Copyright date

2023

ISSN

0963-8008

eISSN

1468-0416

Language

  • en

Depositor

Dr Justine Wood. Deposit date: 27 July 2023

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