Moral hazard, dividends, and risk in banks
Research output: Contribution to journal › Article › peer-review
Electronic versions
DOI
In non-financial firms, higher risk taking results in lower dividend payout ratios. In banking, public guarantees may result in a positive relationship between dividend payout ratios and risk taking. I investigate the interplay between dividend payout ratios and bank risk-taking allowing for the effect of charter values and capital adequacy regulation. I find a positive relationship between bank risk-taking and dividend payout ratios. Proximity to the required capital ratio and a high charter value reduce the impact of bank risk-taking on the dividend payout ratio. My results are robust to different proxies for the dividend payout ratio and bank risk-taking.
| Original language | English |
|---|---|
| Journal | Journal of Business Finance and Accounting |
| Volume | 41 |
| Issue number | 1-2 |
| DOIs | |
| Publication status | Published - 13 Jan 2014 |