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  1. Why European banks adjust their dividend payouts?
    Author: Belloni, Marco; Grodzicki, Maciej; Jarmuzek, Mariusz
    Published: [2023]
    Publisher:  European Central Bank, Frankfurt am Main, Germany

    Economic literature suggests that banks change their dividend payouts for three main reasons. They may be willing to signal good future profitability to shareholders to address information asymmetry, or use dividends to mitigate the agency costs, or... more

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    Verlag (kostenfrei)
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    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 534
    Inter-library loan:
    No inter-library loan

     

    Economic literature suggests that banks change their dividend payouts for three main reasons. They may be willing to signal good future profitability to shareholders to address information asymmetry, or use dividends to mitigate the agency costs, or could come under pressure from prudential supervisors and regulators to retain earnings. The COVID-19 pandemic led to introduction of sector-wide recommendation by regulators to suspend dividend payouts in view of prevailing large uncertainty. Using a panel data approach for two samples of listed and unlisted European banks, this paper provides evidence that, over a decade and a half preceding the pandemic, bank dividend payouts were adjusted in line with the three motivations found in the literature. The results are robust to selection of alternative variables representing these motivations. Banks are found not to discount expectations about future economic conditions or their own profitability when making payouts. Simulations shown in the paper suggest that, in the absence of supervisory recommendations, banks would likely have reduced the payouts only slightly in the first year of the pandemic.

     
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    Source: Union catalogues
    Language: English
    Media type: Ebook
    Format: Online
    ISBN: 9789289955089
    Other identifier:
    hdl: 10419/278304
    Series: Working paper series / European Central Bank ; no 2765 (January 2023)
    Subjects: bank dividends; payout policies; financial regulation
    Scope: 1 Online-Ressource (circa 42 Seiten), Illustrationen
  2. Evaluating the impact of dividend restrictions on euro area bank market values
    Author: Andreeva, Desislava Č.; Bochmann, Paul; Schneider, Julius
    Published: [2023]
    Publisher:  European Central Bank, Frankfurt am Main, Germany

    This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two... more

    Access:
    Verlag (kostenfrei)
    Resolving-System (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 534
    Inter-library loan:
    No inter-library loan

     

    This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The recommendation affected the market values of banks directly, by delaying investor cash flows and indirectly, by increasing the uncertainty about future distributions and thus banks' equity risk premia. The impact differed across banks depending on their distribution plans and risk-adjusted profitability. Our analysis highlights the importance of managing perceptions about dividend uncertainty through credible communication about the expected duration, frequency and severity of dividend restrictions to limit their unintended side effects.

     
    Export to reference management software   RIS file
      BibTeX file
    Source: Union catalogues
    Language: English
    Media type: Ebook
    Format: Online
    ISBN: 9789289959834
    Other identifier:
    hdl: 10419/278363
    Series: Working paper series / European Central Bank ; no 2787 (February 2023)
    Subjects: bank dividends; banking supervision; bank capital; COVID-19 pandemic; bank cost of equity
    Scope: 1 Online-Ressource (circa 42 Seiten), Illustrationen