The Influence of the Degree of Bank Ownership on the Dividend Pay-Outs of German Firms

Germany shows a remarkably concentrated ownership structure of firms, which appears to be highly shaped by strong ties between organizations and banks. As a result, banks play an important role in making business decisions. One of these decisions is the amount of money a firm issues as a dividend. In the regard of agency conflicts, the literature shows that dividends are often used to minimize agency costs. Banks as large shareholders are said to reduce those agency costs. It is examined that bank-controlled firms do not appear to prioritize high or stable dividends. Consequently, this paper aims to provide insides on the relationship between bank ownership and dividend pay-outs and therefore, whether banks intend to mitigate agency costs by favoring low dividend pay-outs. To investigate this matter, mixed linear models are conducted with a sample of German firms, which were listed on any German stock exchange in the years of 2006 to 2013. Evidence is found for the influence of bank ownership on the dividend pay-out of firms. It appears that the higher the percentage of shares owned by financial shareholders, the higher the dividend pay-out of the respective firm will be.