Dividend payouts of commercial banks

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In this paper, we examine relations between a bank's dividend payouts and stock and option holdings of the top five executives. We find a negative relation between dividend payouts and stock option holdings although the relation becomes significantly weaker after the enactment of Gramm-Leach-Bliley in 1999 and the dividend tax cut in 2003. We also find that dividend payouts are negatively related to managerial stock holdings prior to the dividend tax cut but this relation becomes significantly positive in the post dividend tax cut regime. This is consistent with firms increasing dividend payments for firms with executives with large stock holding in the post tax cut regime.

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