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Bank Payout Policy, Regulation, and Politics

Author

Listed:
  • Rüdiger Fahlenbrach
  • Minsu Ko
  • René M. Stulz

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.

Suggested Citation

  • Rüdiger Fahlenbrach & Minsu Ko & René M. Stulz, 2024. "Bank Payout Policy, Regulation, and Politics," NBER Working Papers 32770, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32770
    Note: CF
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    More about this item

    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

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