Understanding Bank Payouts During the Crisis of 2007-2009
Review of Corporate Finance Studies, forthcoming
83 Pages Posted: 24 Jun 2015 Last revised: 6 Apr 2022
Date Written: January 27, 2022
We study U.S. banks’ payout policy in 2007-2008. We benchmark these payouts against payouts before the crisis, measure stock price reactions to announcements of dividend changes, and analyze changes in the relation between payout growth and future performance. Further, we examine cross-sectional variation in banks’ payout policy to gauge the possible motives underlying banks’ payout decisions in 2007-2008. We do not find that banks that have a higher willingness to take risk or that have higher incentives to undertake asset substitution use their payout policy to engage in more wealth transfer compared to other banks.
Keywords: dividends, total payout, financial crisis, insider trading
JEL Classification: G21, G24, G28, G32, G35
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