Accounting and Finance Research Community Internal Staff Seminar – Dr Shams Pathan

Title: Organization Capital in Banks and their Dividend Policy

Date: 22 May 2024

Time: 15:00- 16:00

Location: NUBS.2.05

If you would like to attend, please register using the following link:

Organization Capital in Banks and their Dividend Policy

Speaker:  Dr Shams Pathan

Abstract:

Banks persistently pay dividends even at times of crisis which has drawn attention from various stakeholders including public, policy makers, regulators, governments, mass media, and academics. To understand better why bank pay dividends, we examine whether and how organization capital, an intangible asset reflecting stock of knowledge, capabilities, culture, business process, and system that integrate both human skills and physical capital to improve organizational efficiency, of banks affects their dividend policy. We argue a negative association between organization capital and dividend because organizational capital increases managerial capability, disclosure quality, and reduced financial constraints. Accordingly, we find solid evidence that banks with greater organization capital pay 3.55%–4.50% less dividend, corresponding to a value of $218,618–$276,503. We offer financial constraints, and transparency as two important mediating factors. In addition, the effect on cash dividend is dominant for banks with high common ownerships, enhanced disclosure quality, low competition, greater long-term shareholdings, and low performance-sensitive managerial incentives. Our main findings remain robust to the use of multiple proxies, alternative specifications, and three methods to address endogeneity concerns – staggered difference-in-differences based on the UTSA adoption, two-stage least squares, and propensity score matching.