Moral hazard, dividends, and risk in banks


In non-financial firms, higher risk taking results in lower dividend payout ratios. In banking, public guarantees may result in a positive relationship between dividend payout ratios and risk taking. I investigate the interplay between dividend payout ratios and bank risk-taking allowing for the effect of charter values and capital adequacy regulation. I find a positive relationship between bank risk-taking and dividend payout ratios. Proximity to the required capital ratio and a high charter value reduce the impact of bank risk-taking on the dividend payout ratio. My results are robust to different proxies for the dividend payout ratio and bank risk-taking.

Publication DOI:
Divisions: College of Business and Social Sciences > Aston Business School
Additional Information: This is the peer reviewed version of the following article: Onali, E. (2014). Moral Hazard, Dividends, and Risk in Banks. Journal of business finance and accounting, 41(1-2), 128-155, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Uncontrolled Keywords: bank risk taking,dividend,moral hazard,Business, Management and Accounting (miscellaneous),Accounting,Finance
Full Text Link: http://onlineli ... .12057/abstract
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2014-01
Published Online Date: 2014-01-13
Authors: Onali, Enrico (ORCID Profile 0000-0003-3723-2078)



Version: Accepted Version

Export / Share Citation


Additional statistics for this record