Business, Management and Accounting
2 years ago

Bank Dividends Lower Deposit Costs, Expose Risks During Financial Crises.

Asian Academy of Management Journal of Accounting and Finance
How Do Depositors Respond to Bank Dividend Policy? Evidence from Market Discipline, Global Financial Crisis and COVID-19 Pandemic
Dung Tran

Paper Summary

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Depositors respond positively to banks that pay dividends, leading to lower deposit costs. Banks paying dividends reduce information gaps between insiders and outsiders, resulting in lower funding costs. During the global financial crisis, insured and uninsured depositors showed indifference, but the COVID-19 crisis highlighted the importance of being aware as a depositor.