【正文】 s initiatives to limit dividend payouts by undercapitalized banks. Because our findings provide robust empirical support for the signaling and agency cost hypotheses, the reforms may have an unintended impact on the use of dividends as both signaling and agency cost reduction mechanisms. Inability to use these governance mechanisms may reduce the potential to attract external financing, both debt and equity. The level up to which regulators may want to allow signaling and agency mechanisms to function is an issue that deserves serious attention from academics and regulators alike. Acknowledgments We are grateful to the Managing Editor, Jeffry Netter, and the anonymous reviewer, for their ments and suggestions. We acknowledge the financial support from “ Funda231。 therefore a positive relationship is expected between independence and dividend payouts. We used the monly deployed Independence Indicator (independence) developed by Bankscope to capture the effect of agency costs. This indicator classifies the degree of independence of firms from their shareholders. Based on the data for the end of the period under analysis, the dummy independence assumes a value of unity for the most independent banks and zero for all the others (banks with block shareholders). The agency cost hypothesis cannot be rejected if the coefficient associated with independence is positive and statistically significant. Since banks are regulated, and major regulatory shifts occurred during our reference period 2020– 09, it is necessary to control for their influence in our model. The degree of regulatory pressure should capture the differences in the dividend payouts across distinct degrees of capitalization and risk appetites. The assumption is that banks with (riskweighted) capital ratios below or close to the minimum requirements will be subject to closer monitoring by their supervisors (see Section 1). Previous studies captured the effect of regulatory pressure by deploying the ratio of equity to total assets. However, because regulators closely follow the regulatory definition of capital, we measured regulatory pressure (capitalization) as the average of the tier 1 leverage ratio (tier 1 capital to assets) during the reference period. Lower leverage (., higher values for capitalization) signals stronger financial health and is expected to be associated with higher dividend payouts. Therefore, a positive relationship is expected between capitalization and dividend payout. Additionally, we included a dummy variable for regulatory pressure based on the capital categories of the Federal Deposit Insurance Corporation Improvement Act (FDICIA).14 Section 131 of the FDICIA establishes a system of prompt corrective actions derived from a classification system that divides banks into five categories: “ well capitalized ” , “ adequately capitalized ” , “ undercapitalized ” , “ substantially undercapitalized” and “ critically undercapitalized.” Banks are classified according to thresholds using riskbased capital and leverage ratios as the basis. The majority of the banks in our sample were classified as “ well capitalized” . We consider that regulators increase their pressure on bankswhen banks are approaching the minimumlevels of capital and not only when those levels are breached. Therefore, the banks considered to be subject to increased regulatory pressure are those not classified as “ well capitalized” and those currently classified as “ well capitalized” but which may be downgraded (., banks that present leverage or riskweighted capital ratios close to the limits of adequate capitalization). For the purpose of this variable, the following thresholdswere considered: 8% instead of 6% for the tier 1 riskweighted capital ratio, and 7% instead of 5% for the 共 頁 ， 第 5 頁 ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ 裝 ┊ ┊ ┊ ┊ ┊ 訂 ┊ ┊ ┊ ┊ ┊ 線 ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ tier 1 leverage ratio. To capture this effect, we included a dummy PCA in our model. This variable assumes a value of unity if a bank does not meet at least one of these thresholds. In total, the variable assumes a value of unity for 44 observations before the crisis and 73 observations during the crisis. Undercapitalized banks (banks subject to regulatory pressure) are expected to be associated with lower dividend , a negative relationship is expected between PCA and dividend payout. In order to test the hypothesis that undercapitalized banks faced greater regulatory pressure to plowback their earnings than wellcapitalized banks, we considered the interaction of PCA with profitability. With this variable, the relevance of profitability as a determinant of banks39。s (2020) characteristics of dividend payers (size, profitability and growth opportunities)。 Brook et al., 2020). The financial crisis has further enhanced the interest in the application of corporate finance and governance theories due to the unique macroeconomic context and the regulatory shift which is believed to have hit financial firms the most (see, for example, Erkens et al., 2020). We contribute to this emerging strand in the literature by studying banks39。 prospects and increase their potential to attract debt and equity financing when required。 Collins et al., 1994。ncia e Teologia” (PTDC/EGEECO/114977/2020). The views 共 頁 ， 第 13 頁 ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ 裝 ┊ ┊ ┊ ┊ ┊ 訂 ┊ ┊ ┊ ┊ ┊ 線 ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ ┊ and opinions expressed in this paper are those of the authors and do not necessarily represent those of the institutions with which the authors are affilia