Stakeholder orientation and bank payout policy : evidence from US constituency statutes

Abstract

We investigate the impact of stakeholder orientation on bank payout policy. As a quasi-experimental setting, we exploit the staggered enactment of constituency statutes across US states, which broaden the scope of managerial duties to an extended group of stakeholders. The results of a difference-in-differences analysis suggest that bank holding companies (BHCs) incorporated in states enacting constituency statutes experience significant declines in total payouts, which is driven by a decline in share repurchases. This observed decline in share repurchases is stronger for banks with sizeable implicit claims, lower transparency and substantial agency conflicts. These findings remain intact following a myriad of robustness checks and alternative estimation techniques.