Moral hazard, dividends, and risk in banks

Enrico Onali*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


In non-financial firms, higher risk taking results in lower dividend payout ratios. In banking, public guarantees may result in a positive relationship between dividend payout ratios and risk taking. I investigate the interplay between dividend payout ratios and bank risk-taking allowing for the effect of charter values and capital adequacy regulation. I find a positive relationship between bank risk-taking and dividend payout ratios. Proximity to the required capital ratio and a high charter value reduce the impact of bank risk-taking on the dividend payout ratio. My results are robust to different proxies for the dividend payout ratio and bank risk-taking.

Original languageEnglish
Pages (from-to)128-155
Number of pages28
JournalJournal of Business Fnance and Accounting
Issue number1-2
Early online date13 Jan 2014
Publication statusPublished - Jan 2014

Bibliographical note

This is the peer reviewed version of the following article: Onali, E. (2014). Moral Hazard, Dividends, and Risk in Banks. Journal of business finance and accounting, 41(1-2), 128-155, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.


  • bank risk taking
  • dividend
  • moral hazard


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