Effects of the Business Model on Dividend Policy: Evidence from US Banks
Using a large panel of US bank holding companies, we provide one of the first examinations on the relation between bank business model and dividend policy. We document consistent evidence of higher dividends for diversified banks. Private banks that engage in non-traditional banking activities tend to pay more dividends than public banks do. This positive effect is more pronounced for medium banks, following small banks. However, we do not observe any relation between business model and dividend payment for large banks. The effect of diversification on the dividend is mitigating during the crisis. Our evidence remains unchanged with alternative measures as well as econometric approaches. Our study is of interest to regulators and policymakers who are concerns about the bank business model. (original abstract)
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