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Dividend Policy: The Case of European Banks (2003-2011)

Dividend Policy: The Case of European Banks (2003-2011)

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An essay for the 2012 Undergraduate Awards Competition by Anna Ballot. Originally submitted for BA Finance and Investment at None, with lecturer Sheila O’Donohoe in the category of Business & Economics
An essay for the 2012 Undergraduate Awards Competition by Anna Ballot. Originally submitted for BA Finance and Investment at None, with lecturer Sheila O’Donohoe in the category of Business & Economics

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Published by: Undergraduate Awards on Aug 30, 2012
Copyright:Attribution Non-commercial

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10/27/2013

 
 
Dividend Policy: The Case of European Banks (2003-2011)
Word Count:
4384
 
 
 
Abstract
The recent financial crisis saw many firms in financial difficulty, with state aid andbailouts receiving extensive publicity. The banking industry was at the forefront of this crisis. The main objective of this paper is to examine dividend policy in theEuropean commercial banking sector during the period 2003 to 2011. Thisincorporates the crisis which is shown to have a significant impact on bankspropensity to pay. There are many reasons to study dividend policy. A commonquestion in literature is whether or not dividends matter, and this forms the base of this study. The reason for choosing the time frame of 2003 to 2011 is to incorporatethe effect of the financial crisis. This should show a more dramatic change in dividendpolicy compared to examining a different time frame. Dividend policy has shifteddramatically in the banking sector; once a safe, high yield investment, banking stockscollapsed following the crisis, with dividend pay-outs deteriorating dramatically. Thefactors which affect dividend policy within banks are also examined in this paper:size, profitability, investment opportunities and risk. Size and profitability arehistorically shown to have a positive relationship with a banks dividend pay-out.Conversely, there is believed to be a negative correlation between dividend pay-outsand risk and investment opportunities, according to theory. A significant reduction individend pay-out is found, which can be attributable to the financial crisis; with sizeappearing to be the most prominent factor to influence dividend policy.
 
 
Table of Contents
7.
 
Acknowledgements
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