IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v30y2017i3p988-1018..html

Bank Capital and Dividend Externalities

Author

Listed:
  • Viral V. Acharya
  • Hanh T. Le
  • Hyun Song Shin

Abstract

Dividend payouts erode equity capital and affect the relative value of claims on a bank. Through this channel, when banks have contingent claims on each other, one bank’s capital policy affects the equity value and risk of default for other banks. When such externalities are strong, bank capital becomes a public good, whereby the private equilibrium features excessive dividends and inefficient recapitalization relative to the efficient policy that maximizes total banking sector equity. We relate these implications to the observed bank behaviour during the crisis of 2007–2009.

Suggested Citation

  • Viral V. Acharya & Hanh T. Le & Hyun Song Shin, 2017. "Bank Capital and Dividend Externalities," The Review of Financial Studies, Society for Financial Studies, vol. 30(3), pages 988-1018.
    • Handle: RePEc:oup:rfinst:v:30:y:2017:i:3:p:988-1018.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhw096
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:30:y:2017:i:3:p:988-1018.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.