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EU banks' dividend policies: main determinants and the role of capital ratios

Author

Listed:
  • Salvatore Cardillo

    (Bank of Italy)

  • Jacopo Raponi

    (Bank of Italy, European Central Bank)

Abstract

The aim of this work is to gauge the main determinants of EU banks’ dividend policies, by testing four theoretical assumptions, i.e. signaling, agency conflict (between shareholders and managers and between shareholders and creditors), life-cycle and regulatory pressure, on a sample of 79 banks established in the European Union (including UK) over a 15-year period. Special attention is given to the regulatory pressure theory, as our model investigates the role of both the actual capital level and the surplus above minimum requirements. Results show that the signaling, the regulatory pressure and the shareholders vs. creditors agency conflict theories hold for banks. The life-cycle theory only partially holds. With regard to the regulatory variables, capital surplus appears to have a remarkably higher explanatory power than actual capital level.

Suggested Citation

  • Salvatore Cardillo & Jacopo Raponi, 2023. "EU banks' dividend policies: main determinants and the role of capital ratios," Temi di discussione (Economic working papers) 1403, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1403_23
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2023/2023-1403/en_tema_1403.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bank; dividend policy; capital requirements; bank regulation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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