Competition and bank dividends

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Abstract

We investigate the impact of state level competition on bank dividends following the passage of the US Interstate Banking and Branching Efficiency Act (IBBEA). Using a sample of top-tier US bank holding companies, we find that in states where extensive deregulation leads to intensified competition, banks pay fewer dividends relative to counterparts operating in states where deregulation took place more slowly. These findings are stronger for banks with lower expected future earnings, suggesting that competition reduces the ability of lower performing banks to continue paying dividends. We also find that banks operating in states characterised by higher competition and less supervisory oversight pay higher dividends than counterparts operating in similarly competitive states with stricter supervision.
Original languageEnglish
Article number102898
Number of pages20
JournalJournal of International Money and Finance
Volume137
Early online date30 Jun 2023
DOIs
Publication statusPublished - 1 Oct 2023

Keywords

  • Banking
  • Competition
  • Deregulation
  • Dividends
  • Supervision

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