CEO Power, Government Monitoring, and Bank Dividends

By Enrico Onali, Ramilya Galiakhmetova, Phil Molyneux, Giuseppe Torluccio. 2016

135 citations recorded by the source corpus.

We investigate the role of CEO power and government monitoring on bank dividend policy for a sample of 109 European listed banks for the period 2005–2013. We employ three main proxies for CEO power: CEO ownership, CEO tenure, and unforced CEO turnover. We show that CEO power has a negative impact on dividend payout ratios and on performance, suggesting that entrenched CEOs do not have the incentive to increase payout ratios to discourage monitoring from minority shareholders. Stronger internal monitoring by board of directors, as proxied by larger ownership stakes of the board members, increases performance but decreases payout ratios. These findings are contrary to those from the entrenchment literature for non-financial firms. Government ownership and the presence of a government official on the board of directors of the bank, also reduces payout ratios, in line with the view that government is incentivized to favor the interest of bank creditors before the interest of minority shareholders. These results show that government regulators are mainly concerned about bank safety and this allows powerful CEOs to distribute low payouts at the expense of minority shareholders.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/781bef5ab7cdeb71351009cc248c251d6f24e302

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Enrico Onali
2. Giuseppe Torluccio
3. Francesco Vallascas
4. Giovanni Cardillo
5. Kevin Keasey
6. Sabur Mollah

In Finance

1. Sabur Mollah
2. Kevin Keasey
3. Enrico Onali
4. Giuseppe Torluccio
5. Francesco Vallascas
6. Giovanni Cardillo

Citations in the corpus

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• Does gender diversity on banks' boards matter? Evidence from public bailouts (2020, background): “However, the existing literature about the impact of gender diversity on bank risk lacks consensus: for example, while Palvia et al. (2015) and Farag and Mallin (2017) provide evidence of a negative impact of gender diversity on bank risk, Berger et al. (2014) find a positive association, and Adams…”