How to regulate bank dividends? Is capital regulation an answer?

Ashraf, Badar Nadeem; Bibi, Bushra; Zheng, Chao

doi:10.1016/j.econmod.2016.05.005

Cited by 32 publications

(27 citation statements)

References 55 publications

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“…12 It induces banks to limit moral hazard behavior. Dividends could also be used by private banks as a risk shifting mechanism in transferring default risk to creditors (depositors) or to the taxpayers through insurance schemes (Kanas, 2013;Ashraf, Bibi & Zheng, 2016). Undercapitalized banks are forced by regulators to improve their ratios, hence bank capitalization should positively affect payouts (Bessler & Nohel, 1996;Theis & Dutta, 2009;Abreu & Gulamhussen, 2013).…”

Section: Dependent and Explanatory Variablesmentioning

confidence: 99%

Payout policy and ownership structure: The case of Islamic and conventional banks

Duqi

Jaafar

Warsame

2020

The British Accounting Review

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Using a sample of Islamic and conventional financial institutions domiciled in 16 countries for the period 2000-2015, we examine how ownership structure affects dividend policy. Our main findings indicate that ownership identity is important in explaining dividend policy in these banks, albeit in different patterns. In particular, the results suggest that government ownership seems to exert negative effects on dividend payouts in both types of banks, which is in line with the preference of governments towards bank stability. With respect to family ownership, the impact is negative for conventional banks but positive for Islamic ones, consistent with agency theory. These results are to some extent similar in the case of foreign ownership where it is associated with a higher payout policy in Islamic banks, but not significant in conventional ones. Our results are robust to an array of additional analyses including propensity score matching.

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Section: Dependent and Explanatory Variablesmentioning

confidence: 99%

Payout policy and ownership structure: The case of Islamic and conventional banks

Duqi

Jaafar

Warsame

2020

The British Accounting Review

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“…Second is the ratio of shareholders equity to bank total assets (oetta). These variables have been widely used in the literature to measure bank capital [49,50]. The impact of both of these variables on the banks' cost of financial intermediation and profitability is uncertain, as described in Section 2.…”

Section: Main Independent Variablesmentioning

confidence: 99%

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

Zheng

Rahman

Begum

et al. 2017

JRFM

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Abstract:In response to the recent global financial crisis, the regulatory authorities in many countries have imposed stringent capital requirements in the form of the BASEL III Accord to ensure financial stability. On the other hand, bankers have criticized new regulation on the ground that it would enhance the cost of funds for bank borrowers and deteriorate the bank profitability. In this study, we examine the impact of capital requirements on the cost of financial intermediation and bank profitability using a panel dataset of 32 Bangladeshi banks over the period from 2000 to 2015. By employing a dynamic panel generalized method of moments (GMM) estimator, we find robust evidence that higher bank regulatory capital ratios reduce the cost of financial intermediation and increase bank profitability. The results hold when we use equity to total assets ratio as an alternative measure of bank capital. We also observe that switching from BASEL I to BASEL II has no measurable impact on the cost of financial intermediation and bank profitability in Bangladesh. In the empirical analysis, we further observe that higher bank management and cost efficiencies are associated with the lower cost of financial intermediation and higher bank profitability. These results have important implications for bank regulators, academicians, and bankers.

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“…These mixed findings motivate further investigation into the matter. In addition, although these multi-country studies are helpful in general understanding 2 , some recent studies such 2 A number of recent studies such as Ashraf and Zheng [32], Ashraf et al [33], Ashraf et al [34], Houston et al [35], Ashraf [36], Kanagaretnam et al [37], Ashraf [38] and Zheng and Ashraf [39] find that country-level institutions (e.g., bank regulations, national culture, legal institutions, political institutions, trade and capital openness, etc.) are important for different practices 4 of 20 as Agoraki et al [40], Jokipii and Milne [2] and Delis et al [41] show the heterogeneous effects of capital regulation on bank risk-taking, depending upon factors such as the market power of a bank, other prudential regulations that can affect bank risk in addition to capital regulation, and the capital regulation implementation period in a country.…”

Section: Literature Reviewmentioning

confidence: 99%

Capital Regulation and Bank Risk-Taking Behavior: Evidence from Pakistan

Ashraf

Arshad

Yuan-cheng

2016

IJFS

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Abstract:In response to the global financial crisis of [2007][2008][2009], risk-based capital requirements have been reinforced in the new Basel III Accord to counter excessive bank risk-taking behavior. However, prior theoretical as well as empirical literature that studies the impact of risk-based capital requirements on bank risk-taking behavior is inconclusive. The primary purpose of this paper is to examine the impact of risk-based capital requirements on bank risk-taking behavior, using a panel dataset of 21 listed commercial banks of Pakistan over the period [2005][2006][2007][2008][2009][2010][2011][2012]. Purely regulatory measures of bank capital, capital adequacy ratio, and bank assets portfolio risk, risk-weighted assets to total assets ratio, are used for the main analysis. Recently developed small N panel methods (bias corrected least squares dummy variable (LSDVC) method and system GMM method with instruments collapse option) are used to control for panel fixed effects, dynamic dependent variables, and endogenous independent variables. Overall, the results suggest that commercial banks have reduced assets portfolio risk in response to stringent risk-based capital requirements. Results also confirm that all banks having risk-based capital ratios either lower or higher than the regulatory required limits, have decreased portfolio risk in response to stringent risk-based capital requirements. The results are robust to alternative proxies of bank risk-taking, alternative estimation methods, and alternative samples.

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How to regulate bank dividends? Is capital regulation an answer?

Cited by 32 publications

References 55 publications

Payout policy and ownership structure: The case of Islamic and conventional banks

Payout policy and ownership structure: The case of Islamic and conventional banks

Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh

Capital Regulation and Bank Risk-Taking Behavior: Evidence from Pakistan

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