The risk-shifting value of payout: Evidence from bank enforcement actions

Pugachev, Leonid

doi:10.1016/j.jbankfin.2019.07.015

Cited by 9 publications

(7 citation statements)

References 59 publications

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“…On the other hand, one stream of literature points out that excessive corporate payouts can cause higher leverage ratios and greater financial risk (Maxwell and Stephens, 2003;Bae et al, 2011;Chen et al, 2015;Almeida et al, 2016;Pugachev, 2019). A firm can be viewed as a nexus of contacts between shareholders and stakeholders where various stakeholders provide resources in exchange for both explicit contractual claims and implicit claims (Jensen and Meckling, 1976;Easterbrook andFischel, 1989, Deng et al, 2013).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Song

Yao

2020

Journal of Banking & Finance

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Section: Hypothesis Developmentmentioning

confidence: 99%

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Song

Yao

2020

Journal of Banking & Finance

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“…Accordingly, managers' risk-shifting incentives are more significant if leverage is high or charter value is low: i.e., if managers don't have much to lose. Onali (2014) and Pugachev (2019) find empirical evidence consistent with this theory. Juelsrud and Nenov (2019) hypothesize that depositors and wholesale funders may endogenously interpret higher dividends as a signal of available liquidity.…”

Section: Manager Perspectivementioning

confidence: 55%

“…We sourced transaction-level CPP data from the US Treasury. 5 We then reconciled data sets according to CUSIP number (Thomson Reuters, Bloomberg, and Chicago Fed data), and regulatory identifier or according to name and US state when regulatory identifiers were unavailable (US Treasury, Fed, OCC, FDIC, and OTS data), similar to Pugachev (2019).…”

Section: Samplementioning

confidence: 99%

Agency Conflicts and Dividend Persistence

d'Udekem

2021

J Financ Serv Res

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Bank dividends are unusually persistent. In a crisis, they exacerbate systemic risk and raise concerns for regulators. Bank managers, however, may keep dividends elevated to mitigate agency conflicts with shareholders. One theory holds that persistent dividends may substitute for monitoring by dispersed shareholders. A second theory proposes that they attract institutional shareholders who monitor banks, mitigate agency conflicts, and seek to protect their investments' value. After controlling for regulatory enforcement actions, we test both theories using 7722 bank-quarter observations spanning the 2007-2009 financial crisis. Our results suggest that dividend persistence increases with managerial agency conflicts but decreases in the presence of concentrated institutional shareholders, consistent with the second theory. In addition, contrary to the first theory, dispersed shareholders have no influence on bank dividend policies. Instead, these dispersed shareholders are associated with more frequent stock repurchase programs.

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“…Among these studies, Kanas (2013) and Onali (2014) find that high default risk is associated with larger dividend payments, which supports the risk‐shifting hypothesis . Similarly, Pugachev (2019), Koussis and Makrominas (2019), and De Cesari et al. (2023) provide evidence in favour of the risk‐shifting behaviour by showing that wealth expropriation is the dominant driver of risky banks’ dividends.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 95%

Bank dividend payout policy and debt seniority: Evidence from US Banks

Alhalabi,

Castro,

Wood

2023

Financial Market

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Bank depositors and creditors are expected to play an important role in banks’ dividend policy since they can either discipline or incentivise managers to pay larger dividends. We provide evidence suggesting that depositors are more influential than subordinated debtholders in disciplining banks facing extreme solvency situations from wealth expropriation, which is consistent with the monitoring hypothesis. The results for solvent banks show that deposits and subordinated debt explain larger dividends, suggesting that signalling incentives drive these cash payments. Diving deeper into our groups of banks, we observe that the risk‐shifting hypothesis becomes more nuanced as listed banks exercise wealth expropriation after the crisis through the uninsured deposits channel. Our results provide significant support for major dividend theories, unravelling the debt channels through which these theories may hold.

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The risk-shifting value of payout: Evidence from bank enforcement actions

Cited by 9 publications

References 59 publications

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Agency Conflicts and Dividend Persistence

Bank dividend payout policy and debt seniority: Evidence from US Banks

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