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Bank stability and dividend policy

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  • Dung Viet Tran
  • David McMillan

Abstract

Relying on a US bank sample, we document the double-edged sword of dividends on the bank's riskiness. Paying dividends exposes banks to stricter market discipline, then decreases the risk-taking behaviors of bank management compared with non-payers, consistent with the Dividend-Stability Channel. However, among banks that pay dividends, excessive dividends makes them riskier, consistent with the Dividend-Fragility Channel. Our results remain unchanged due to a battery of robustness testings.

Suggested Citation

  • Dung Viet Tran & David McMillan, 2021. "Bank stability and dividend policy," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1982234-198, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1982234
    DOI: 10.1080/23322039.2021.1982234
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