Bank payout policy, regulation, and politics
60 Pages Posted: 24 Jul 2024
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Bank payout policy, regulation, and politics
Bank Payout Policy, Regulation, and Politics
Date Written: July 24, 2024
Abstract
Bank payout policy is strongly affected by regulation and politics, especially for the largest banks. Banks, but not industrial firms, have consistently lower payouts in times of high regulation uncertainty and under democratic presidents. After the Global Financial Crisis, bank regulators' influence on payout policies of the largest banks increases sharply and repurchases become more important than dividends for these banks. Repurchases respond more to regulatory climate changes than dividends. The stock-price reaction of the largest banks to the election of Donald Trump is larger than for small banks or industrial firms, and their repurchases increase sharply afterwards.
Keywords: Financial institutions, payout policy, dividends, repurchases, regulation, political influence
JEL Classification: G21, G28, G35
Suggested Citation: Suggested Citation