Bank Payout Motives at the Start of the Crisis of 2007-2009

63 Pages Posted: 24 Jun 2015 Last revised: 19 Feb 2021

See all articles by Peter Cziraki

Peter Cziraki

University of Toronto - Department of Economics; Tilburg Law and Economics Center (TILEC)

Christian Laux

Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF); European Corporate Governance Institute (ECGI)

Gyongyi Loranth

University of Vienna; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 10, 2021

Abstract

We study U.S. banks’ payout policy in 2007-2008. We start by benchmarking bank payouts in 2007 and 2008 against a model of payouts before the crisis. We then investigate stock price reactions to dividend changes and cross-sectional variation in the relation between insider information about banks’ future performance and payout policy to gauge the role of wealth transfer and fear of adverse market reactions underlying payout decisions in both years. While we do not find conclusive evidence of either motive in 2007-2008, our results corroborate concerns that it can be necessary to constrain dividends when a crisis unfolds.

Keywords: dividends, total payout, financial crisis, insider trading

JEL Classification: G21, G24, G28, G32, G35

Suggested Citation

Cziraki, Peter and Laux, Christian and Loranth, Gyongyi, Bank Payout Motives at the Start of the Crisis of 2007-2009 (February 10, 2021). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 480/2016, TILEC Discussion Paper No. 2016-019, Available at SSRN: https://ssrn.com/abstract=2621772 or http://dx.doi.org/10.2139/ssrn.2621772

Peter Cziraki (Contact Author)

University of Toronto - Department of Economics ( email )

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HOME PAGE: http://www.economics.utoronto.ca/petercziraki

Tilburg Law and Economics Center (TILEC) ( email )

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Christian Laux

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Gyongyi Loranth

University of Vienna ( email )

Vienna

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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