A prudential paradox: The signal in (not) restricting bank dividends

Name: A prudential paradox: The signal in (not) restricting bank dividends
Author: Güntay, Levent, Jacewitz, S., Pogach, J.

İsim	A prudential paradox: The signal in (not) restricting bank dividends
Yazar	Güntay, Levent, Jacewitz, S., Pogach, J.
Basım Tarihi:	2022
Basım Yeri	- Wiley
Konu	Bank runs, Capital requirements, Dividends, Signaling
Tür	Süreli Yayın
Dil	İngilizce
Dijital	Evet
Yazma	Hayır
Kütüphane:	Özyeğin Üniversitesi
Demirbaş Numarası	0022-2879
Kayıt Numarası	cce3a4f5-557d-4b3e-b599-935fb7a57c84
Lokasyon	International Finance
Tarih	2022
Örnek Metin	By restricting dividends in the weakest banks, prudential regulators counterintuitively induce more capital payouts in marginal banks. The potential for bank runs exacerbates the incentive to signal strength through dividend payments. Regulatory restrictions on those payments can be used to achieve the first-best outcome, but only if the prevailing capital requirements are sufficiently high. In a crisis, the optimal dividend policy is more restrictive, since it allows the weak but solvent banks to pool with the strong. Finally, we show that the optimal release of regulatory bank information depends critically on the regulator's information and dividend restriction policies.
DOI	10.1111/jmcb.12995

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A prudential paradox: The signal in (not) restricting bank dividends

Yazar Güntay, Levent, Jacewitz, S., Pogach, J.

Basım Tarihi 2022

Basım Yeri - Wiley

Konu Bank runs, Capital requirements, Dividends, Signaling

Tür Süreli Yayın

Dil İngilizce

Dijital Evet

Yazma Hayır

Kütüphane Özyeğin Üniversitesi

Demirbaş Numarası 0022-2879

Kayıt Numarası cce3a4f5-557d-4b3e-b599-935fb7a57c84

Lokasyon International Finance

Tarih 2022

Örnek Metin By restricting dividends in the weakest banks, prudential regulators counterintuitively induce more capital payouts in marginal banks. The potential for bank runs exacerbates the incentive to signal strength through dividend payments. Regulatory restrictions on those payments can be used to achieve the first-best outcome, but only if the prevailing capital requirements are sufficiently high. In a crisis, the optimal dividend policy is more restrictive, since it allows the weak but solvent banks to pool with the strong. Finally, we show that the optimal release of regulatory bank information depends critically on the regulator's information and dividend restriction policies.

DOI 10.1111/jmcb.12995