Have European banks maintained their payout policy during the crisis? The role of scrip dividends

Abstract

We analyse the trend among 79 banks from 20 European countries towards scrip dividends. Whereas banks do not seem to smooth cash dividends, they do smooth total dividends, which include both cash and scrip dividends. We also find that the new legal requirements (resulting from the Basel III Accord and other country‐level laws) have different implications on cash and scrip dividends. Whereas the need for better and more capital imposed by these rules has led banks to cut cash dividends, there is a positive relationship between the legal requirements on capital adequacy and scrip dividends.