The Interplay between Dividends and Leverage inside Commercial Banks

Forthcoming in the "International Journal of Financial Research," Vol. 8, No. 2

MODUL University Working Paper No. 4

47 Pages Posted: 31 Oct 2013 Last revised: 22 Feb 2017

See all articles by Silvia Bressan

Silvia Bressan

Free University of Bozen-Bolzano - Faculty of Economics and Management

Date Written: January 2, 2017

Abstract

The paper analyzes the dividends paid by a large sample of commercial banks in the United States during 2006-2011. The most interesting findings arise after the end of 2008. Our measures for the probability of paying dividends and for the dividend payout ratio are positively related to the banks´ non-deposit leverage. Conversely, banks´ dividends correlate negatively to deposit leverage. We argue that during the crisis of 2007-2009 the liquidity needs of banks resorted more to deposits, than to non-deposit debt. This, in turn, had an impact on banks´ dividend policies, to the extent that firms which could raise deposits preferred to preserve their financial stability, and did not pay huge dividends.

Keywords: Banks, Dividends, Leverage

JEL Classification: G21, G35

Suggested Citation

Bressan, Silvia, The Interplay between Dividends and Leverage inside Commercial Banks (January 2, 2017). Forthcoming in the "International Journal of Financial Research," Vol. 8, No. 2 , MODUL University Working Paper No. 4, Available at SSRN: https://ssrn.com/abstract=2347546 or http://dx.doi.org/10.2139/ssrn.2347546

Silvia Bressan (Contact Author)

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

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