## Why European Banks Adjust their Dividend Payouts?

_IMF Working Papers, September 23, 2022_

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## Bibliographic details
- Authors: Marco Belloni, Maciej Grodzicki, Mariusz Jarmuzek
- Published: September 23, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400218972.001

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### Core findings
- Using a panel data approach for two samples of listed and unlisted European banks, the paper provides evidence that, over a decade and a half preceding the pandemic, bank dividend payouts were adjusted in line with the motivations found in the literature.
- Banks change their dividend payouts because they:
  - would like to signal good profitability to shareholders to address information asymmetry,
  - use dividends to mitigate the agency costs, or
  - could come under pressure from prudential supervisors and regulators to retain earnings.
- Banks are found not to discount expectations about future economic conditions or their own profitability when making payouts.
- Simulations show that, in the absence of supervisory sector-wide recommendations to suspend dividend payouts, banks would likely have reduced the payouts only slightly in the first year of the pandemic.

### Methodology
- Empirical approach: panel data analysis applied to two samples (listed and unlisted European banks).
- Time coverage: "a decade and a half preceding the pandemic" (phrase preserved as in source).

### Policy-relevant implications
- Dividend policy reflects signaling motives, agency-cost mitigation, and regulatory/supervisory pressure to retain earnings.
- Supervisory sector-wide recommendations to suspend dividend payouts materially affected actual payout behavior during the pandemic; without such recommendations, the simulated reduction in payouts in the first pandemic year would likely have been small.
- Findings suggest supervisors can influence bank payout behavior through sector-wide guidance, while banks do not appear to proactively adjust payouts based on forecasts of future economic conditions or profitability.

### Key statistics and publication metadata
- Authors: Marco Belloni, Maciej Grodzicki, Mariusz Jarmuzek
- Date: September 23, 2022
- Series: Working Paper No. 2022/194
- Volume: 2022
- Issue: 194
- Pages: 33
- DOI: https://doi.org/10.5089/9798400218972.001
- ISBN: 9798400218972
- ISSN: 1018-5941

*Summary derived from IMF Working Papers entry "Why European Banks Adjust their Dividend Payouts?"*

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_Source: https://www.imf.org/en/publications/wp/issues/2022/09/23/why-european-banks-adjust-their-dividend-payouts-522761_