This paper studies the impact of banks’ dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at treated banks during the 2020 dividend restrictions in the Eurozone and even exit treated banks’ stocks. Using data before the intro-duction of the ban reveals a positive relationship between fund ownership and banks’ dividend yield, highlighting again the importance of dividends for European banks’ fund investors. This reaction has also pricing implications since there is a negative relationship between the dividend restriction announcement day cumulative abnormal returns and the percentage of fund owners per bank.
SAFE Working Paper No. 392
