Bank affiliations and corporate dividend policy in pre-World War I Belgium

We investigate the impact of universal banks on the dividend policy of affiliated companies, in an environment characterised by poor investor protection, booming stock markets and strong banks. Our results, based on a unique sample of 428 listed companies in pre-World War I Belgium, are consistent with the hypothesis that companies with good investment opportunities and a bank director on their board paid higher dividends to establish a good reputation with investors. However, our results also indicate that companies with several bank directors and companies in which the bank had an equity stake paid lower dividends.