Propensity to Pay Dividends: Evidence from US Banking Sector

Abstract

Using Fama and French’s (2001) methodology, this paper attempts to shed light on dividend policy and propensity to pay cash dividends implemented by U.S. commercial banks as a possible alternative choice for dividend-seeking investors. The results show that most banks pay dividends at increasing rates, more banks have started paying dividends, while a few have stopped paying dividends. The findings also indicate that the main explanatory variables in predicting cash dividends are: the total assets, return on equity, and equity to liability ratio.