The savings banks’ decision to distribute profits among their public owners is strongly regulated by law in order to guarantee their adequate funding via retained profits. However, the legal scope is reluctantly exhausted. In this study we examine the determinants of the savings banks’ payout decision in more detail. We find that besides internal determinants also external factors regarding the savings bank’s public owner have strong explanatory power. The better the financial situation of the public owner, the less likely is the savings bank to distribute profits and to increase payouts, respectively.
Kleff, Volker and Martin Weber (2005), Payout Policy and Owners’ Interests – Evidence from German Savings Banks, ZEW Discussion Paper No. 05-59, Mannheim. Download