Why does EU bank has a much bigger higher risk factor but they payout a larger...
Why does EU bank has a much bigger higher risk factor but they payout a larger dividend?
Homework Answers
The EU bank has bigger higher risk due to the systematic risk, total risk and interest rate risk. The payout of larger dividend can be explained by the fact that the relation between the payout ratio and risk is negative. In other words, dividend payout ratio is negatively related to the risk of the firm. Thus, the statement is true that EU bank has bigger risk but they payout larger dividend.
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