Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278363 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2787
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The recommendation affected the market values of banks directly, by delaying investor cash flows and indirectly, by increasing the uncertainty about future distributions and thus banks' equity risk premia. The impact differed across banks depending on their distribution plans and risk-adjusted profitability. Our analysis highlights the importance of managing perceptions about dividend uncertainty through credible communication about the expected duration, frequency and severity of dividend restrictions to limit their unintended side effects.
Subjects: 
bank dividends
banking supervision
bank capital
COVID-19 pandemic
bank cost of equity
JEL: 
G12
G21
G28
G35
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5983-4
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.