The Dividend Policy and Managerial Risk in Banks : Focusing on the Moderating Role of Capital Adequacy in Korea

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.

The research explores using simultaneous regression, to examine the interdependence relationship between managerial ownership, risk, dividend policy, institutional ownership, and leverage policy for Indonesian capital market. The research tries to explain how the relationships in financial policy for manufacture firms in Indonesia. We use five models of regression to represent five different policies in firms that reflect the agency issues and conflict of interest between agent (manager), and principal (insider and outsider shareholders). Jensen and Meckling (1976) argued that agency problem arise from separation of ownership and control. Each of five policies in this research is represent conflict of interest between agent and principal. The research combined models from Crutchley, Jensen, Jahera and Raymond (1999), and Chen and Steiner (1999) to construct five-regression policies model. We find interdependence relationship between managerial ownership, risk, dividend policy, institutional ownership, and leverage policy. We also find substitution effect between dividend policy and managerial ownership, and between managerial ownership and institutional ownership as predicted by agency theory. The substitution effect showed that ownership structure effectively used to reduce the agency problem between agent and principal. The study confirms that the relationship between risk and dividend is non-linear. Keyword: Agency Theory; Managerial Ownership; Risk; Dividend Policy; Debt Policy.

Purpose: The aim of this study is to analyze the influence of liquidity and risk on dividend policy in the nepalese banking sector, with a specific focus on examining the mediating role of investment in the relationship between liquidity and risk and the dividend policy. Methods/Design: The study uses a questionnaire survey, gathering 356 responses from bank managers in Nepal representing various banking categories. It adopts a descriptive and correlational research design, incorporating regression analysis and structural equation modeling (SEM) using AMOS to achieve its objectives. Findings: The results indicate that investment significantly mediates the relationship between liquidity, risk, and dividend policy. Specifically, firms with higher liquidity and greater risk are more likely to invest in profitable projects, which are expected to lead to increased profit distribution within the banking sector in the future. Implications/Limitations: These insights are valuable for both financial managers and policymakers in the Nepalese banking sector. However, the study is limited to the banking sector in Nepal and may not generalize to banks in other regions or financial systems. Originality: This study provides a unique perspective on the interaction between company risk and dividend policy in Nepalese banks, filling a gap in the literature on risk management and shareholder value within the context of emerging economies.

This study investigates the interplay between various financial ratios and the performance of banks, focusing on key metrics. In total, 10 financial ratios of 2,370 banks over a period of 10 years were analyzed. By analyzing the relationships among these ratios, the research aims to provide insights into how dividend policies, capital adequacy, and personnel expenses impact overall bank profitability and operational efficiency. The findings reveal that a positive correlation exists between dividends to personnel costs and ROAA, suggesting that banks that manage their personnel costs effectively can enhance their returns on assets while maintaining generous dividend payouts. Additionally, the study highlights the importance of the total capital ratio in ensuring financial stability, especially during economic fluctuations. Overall, this analysis contributes to a deeper understanding of the financial dynamics within the banking sector, offering valuable implications for stakeholders seeking to optimize bank performance in a competitive landscape. By synthesizing recent literature, this article lays the groundwork for future studies that can further explore the relationships among these financial metrics.

Risk management is a main issue on accounting research recently. This study investigates whether capital adequacy ratios (Basel regulatory capital ratio under 1998 version and traditional capital ratio on the balance sheet) can predict subsequent bank risk, and whether the regulatory risk-based capital ratio is more useful as a warning indicator for bank solvency than the traditional capital ratio in Taiwan. Considering characteristics of banking industry, this study employs an option pricing methodology to obtain implied asset risk as a market-based proxy for a bank's total risk. Empirical results indicate that both capital ratios are negatively associated with subsequent bank risk, and that the regulatory risk-based capital ratio more completely predicts bank risk than the traditional capital ratio does. In other words, the urging warning function of the risk-based capital requirement on bank risk is effective.

Dividend policy is an important corporate decision in determining the proportion of profits distributed to shareholders and reflects a company’s financial condition and performance. This study aims to analyze the effect of profitability, liquidity, and capital adequacy on dividend policy, with firm size as a moderating variable, in Regional Development Banks (BPD) in Indonesia during the 2020–2024 period. The research problem focuses on differences in dividend policies among BPDs and the financial factors influencing them. This study uses secondary data in the form of annual financial statements obtained from the official website of the Financial Services Authority (OJK). The sampling method employed was purposive sampling, resulting in a sample of 24 BPDs with a total of 120 observations. Data analysis techniques include descriptive statistical analysis, multiple linear regression, and Moderated Regression Analysis (MRA). The results indicate that profitability has a positive and significant effect on dividend policy, liquidity has a positive but insignificant effect, and capital adequacy has a negative and significant effect on dividend policy. Firm size is unable to moderate the effect of profitability and liquidity on dividend policy. The findings may serve as a consideration for BPD management in making dividend distribution decisions.

Abstract— This study aims to examine the effect of derivatives, commitments and contingencies on bank risk with Capital Adequacy Ratio as a moderating variable on banking companies listing on the Indonesia Stock Exchange (IDX). This research is a quantitative study, which is measured using a panel data regression based method with eviews 10 . The population of this research is banking companies listing on the Indonesia Stock Exchange (IDX) in 2013-2018. The sample is determined based on the purposive sampling method, with a sample of 32 banking companies so that a total of 192 observations. The data used in this study are secondary data. The data collection technique using the method of documentation via the official website IDX: www.idx.co.id . Hypothesis testing using t test. The results of the research prove that: (1) Derivatives have a negative effect on bank risk which means that derivatives are used by banks for hedging. (2) Commitment has a positive effect on bank risk which means that the commitment of lending at certain interest rates increases the dependence on interest rate volatility so that the use of commitments will increase risk. (3) However, contingencies are proven to have no effect on bank risk because they are used as collateral (contingencies) as a direct substitute for credit so that the counterparty is less likely to commit violations, so this does not affect bank risk. (4) Capital Adequacy Ratio is proven to weaken the negative influence of derivatives on bank risk which means that the CAR determined by the bank is intended to stabilize bank risk so that the CAR will weaken the risk reduction due to derivative transactions. (5) Capital Adequacy Ratio is also proven to be able to weaken the positive influence of commitments on bank risk which means that CAR functions more to stabilize risk, namely when a committed transaction increases risk, CAR will weaken the increase in risk. (6) However, the Capital Adequacy Ratio is proven to be unable to weaken the positive effect of contingencies on bank risk, which means that there is a balance between administrative activities (contingencies) and reserves carried out so that they are not exposed to risk.

This article argues that major post-crisis regulatory initiatives like the Dodd-Frank Act, the Vickers Report, the Liikanen Review and Basel III capital adequacy and liquidity rules that are shaping the banking industry globally are not likely to be successful in de-risking the banks because they do not explicitly engage with the consequences of shareholder value-driven business models that drive management behaviour in banking. Banks operate in a financialized economy where firms compete in the stock market to deliver unrealistic returns to shareholders. The business models of such financialized banks re-locate risks according to conjunctural market and regulatory arbitrage conditions to achieve the unchallenged return targets and therefore thwart the ideal outcomes aimed at by regulatory initiatives. The section ‘Introduction: Post-crisis regulatory reform initiatives to de-risk and re-capitalise banks’ of this article will describe the de-risking and re-capitalisation measures that were introduced by the post-crisis regulatory initiatives in the United States and Europe. The section ‘Financialized bank business models’ will discuss bank business models in a financialised economy and how the post-crisis regulatory initiatives have failed to address the risks in banking that are associated with maximising shareholder value. The section ‘Post-crisis examples of relocated risks in shareholder value-driven banks’ will examine two post-crisis case studies where JP Morgan Chase and the UK retail banks like Lloyds Group, in pursuit of shareholder value creation, suffered losses from activities that the new regulatory initiatives have failed to identify and regulate.

Liquidity risk, which tends to compound other risks such as credit and market risks, has become one of the principal risks in banks. Thus, this study examined the determinants of liquidity risk measured by the loan deposit ratio (LDR). The sample included 30 commercial banks in Vietnam based on secondary data coverage from 2017-2021. Descriptive statistics were used to determine the general situation of the banks' assets, liabilities, and business performance. The random effects model (REM) was chosen to determine factors affecting liquidity risk. The results show the huge gap in the business performance of the four state-owned banks and the rest of the joint-stock commercial banks, and the state-owned banks always accounted for over 50% of the total credit, assets, and deposits of the whole banking system. The average banks’ credit and profit growth rates were around 17% and 30%, respectively, and the bad debt ratio was about 2%. Increasing a bank’s credit growth rate and profitability would push up its liquidity risk. On the other hand, holding several liquid securities that banks could sell immediately to meet solvency requirements and maintaining a high capital adequacy ratio (CAR) would reduce their liquidity risk. These findings are valuable to the banks in understanding how to minimize liquidity risk, such as controlling the credit growth rate and CAR, setting appropriate profit targets, and investing in liquid securities. Additionally, by conducting monetary policies, the State Bank should regulate market liquidity and bank liquidity for the safe operation of the financial system.

This study examines the determinants of credit risk in Nepalese commercial banks, emphasizing macroeconomic and bank-specific factors. The study utilizes a random effects regression model to investigate the impact of various factors on non-performing loans using panel data from 10 commercial banks in Nepal from 2013–2022. The study’s theoretical framework draws on established economic theories, including Kalecki’s business cycle theory and Diamond & Dybvig’s banking theory. It aims to contextualize the relationship between credit risk and various influencing factors. The theory sets the stage for analyzing credit risk determinants in Nepalese banks. The findings demonstrate that non-performing loans are significantly and positively associated with bank size and return on assets, whereas asset quality and bank age have a negative and significant impact. The capital adequacy ratio exhibits a positive but insignificant impact. Among macroeconomic variables, the inflation rate has a positive and significant impact on non-performing loan, whereas real gross domestic product growth reveals a positive but insignificant relationship. These findings are of utmost importance for bank managers and policymakers in Nepal, as they provide valuable insights to enhance credit risk management practices and maintain financial stability in the banking sector.

Dividend policy is a decision made by the company on profits earned at the end of each year to be distributed to shareholders in the form of dividends or used as retained earnings to increase capital for investment financing in the future. Dividend policy will be carried out on companies that are in a stable condition for the profits earned, so that dividend distribution decisions are stable from the period after and the previous period, for example in banking companies. The company's internal parties and the company's external parties will pay attention to several factors that influence decisions in dividend distribution. The research was conducted with the aim of testing and analyzing the effect of profitability, liquidity, firm size, capital adequacy ratio on dividend policy. The population used in this study are banking companies listed on the Indonesia Stock Exchange (IDX) for the 2015-2020 period. The use of data in the form of financial reports and annual reports to be used as an alternative to obtain research samples. The research sample was taken using a purposive sampling method with the criteria of companies that have positive profits and companies that distribute dividends during 2015-2020. Based on these criteria, this study obtained a sample of 98 companies. The data analysis technique uses multiple linear regression analysis. The tests that have been carried out have obtained the results that Profitability (ROA) has a significant negative effect on dividend policy (DPR), Liquidity (LDR) has a significant negative effect on dividend policy (DPR), Firm Size (SIZE) has a significant negative effect on dividend policy (DPR), Capital Adequacy Ratio (CAR) has a significant positive effect on dividend policy (DPR).

The study aims to: (1) Empirically test the impact of Return On Assets (ROA) on the dividend policy in BEI listed banking companies in 2018-2021 (2) Empirical test the influence of the Capital Adequacy Ratio (CAR) on dividend policies in the BEI listed Banking Companies in 2018-2020 (3) Empirically test the effect of the Loan to Deposit Ratios (LDR) on dividend policies in the BEI listed Banking Companies in 2018-2020. The population in this study are Banking company listed on the Indonesian Stock Exchange in 2022 which comprises 43 companies. Sampling using purposive sampling method and based on the defined criteria were obtained samples of as many as 12 companies. The analytical method used is multiple linear regression analysis Eviews version 10. The results showed that Return on Assets (ROA) has a negative effect on the dividend policy, Loan to Deposit Ratio (LDR) has a positive effect on the dividend policy, while the Capital Adequancy Ratio(CAR) has no effect over the dividend Policy. Keywords: Dividend Policy, Capital Adequacy Ratio, Loan To Deposit Ratio, Return On Assets.

This paper analyzed the effects of bank-specific and bank-risk drivers on bank stability as measured by non-performing loans(NPL) of commercial banks in Bangladesh from 2011 to 2021.This study used panel linear regression, and panel corrected standard error (PCSEs) to estimate the model. The main objective of the study was to analysed the effects of bank specific and bank risk on bank stability of conventional banks in Bangladesh. Capital adequacy, asset quality, income diversification, bank competition, managerial efficiency, and profitability (ROE) are used as proxies for bank-specific and liquidity risk; Sensitivity to marketing risk is used as proxies for bank risk, while control variable is used as bank size and non-performing loan (NPL) are used as a proxy for measurement of bank stability. The main results show that capital adequacy and profitability (ROE) are negative, but asset quality, income diversification, bank competition, and managerial efficiency are positively related to the NPL. The results further evaluate those determinants of bank risk, liquidity risk, and marketing risk have a positive impact on the NPL. The control variable bank size has a negative impact on the NPL. Based on our results, authorities in Bangladesh may develop rules for managing operations and ensuring bank stability as measured by NPLs.

This study examines the determinants of bank risk taking for a sample of 15 Jordanian banks, according to Basel I and Basel II standards for capital regulation and by testing the relationship between bank risk taking and banks financial information using multiple linear regression analysis. The study found that most Jordanian banks committed to capital adequacy ratio regulations which decrease the bank risk taking, Bank Risk Taking (RSK) was found to be adversely affected by Capital Adequacy Ratio (CAR), The Franchise value (FRN) has a negative effect on bank risk taking (RSK), The Stable Shareholder (HLD) variable has a significant positive effect on Bank Risk Taking (RSK). The squared value of Stable Shareholders (HLD_SQR) has a significant negative effect on Bank Risk Taking (RSK).

Urgency of the research. The importance of the problem of ensuring the financial stability of banks has grown significantly after the global financial crisis, and in Ukraine it has become relevant again since 2014. The situation of economic turbulence has led to a radical revision of the determinants of financial stability, as well as conceptual approaches to risk management of the bank. Target setting. Currently, the banking sector is on the verge of implementing internal capital adequacy assessment procedures (ICAAP), which determines the practical significance of substantiating the areas of improvement of the bank's risk management system. Actual scientific researches and issues analysis. Problems of bank’s risk management are revealed in the works of T. Vasylieva, V. Kovalenko, N. Tkachenko, N. Shulga and others. Methodological principles of ensuring the financial stability of the bank in conditions of uncertainty are reflected in the works of O. Kolodizev, N. Pogorelenko, T. Unkovskaya, M. Khutorna, I. Chmutova and others. Uninvestigated parts of general matters defining. Further research is needed on the functioning of the bank's risk management system, substantiation of key requirements, compliance with which would serve as a guarantee of financial stability of the bank in different conditions of the macroeconomic environment. The research objective. The purpose of the article is to substantiate the directions of perspective transformation of the bank's risk management system to ensure its financial stability. The statement of basic materials. The article stages the development of the bank's risk management system to substantiate the logic and determinants of further transformation of this system in order to enable long-term maintenance of its financial stability. Conclusions. The determinants of perspective transformation of the bank's risk management system in the aspect of ensuring financial stability are substantiated, which include: 1) spectrum of risks; 2) risk management priorities; 3) the complexity of the risk management methodology.