Competition and bank dividends

We investigate the impact of state level competition on bank dividends following the pas-sage of the US Interstate Banking and Branching Efficiency Act (IBBEA). Using a sample of top-tier US bank holding companies, we find that in states where extensive deregulation leads to intensified competition, banks pay fewer dividends relative to counterparts oper-ating in states where deregulation took place more slowly. These findings are stronger for banks with lower expected future earnings, suggesting that competition reduces the ability of lower performing banks to continue paying dividends. We also find that banks operating in states characterised by higher competition and less supervisory oversight pay higher dividends than counterparts operating in similarly competitive states with stricter supervision.& COPY; 2023 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).