Access to banking and corporate dividend policy: Evidence from the distribution of bank branches in China

In the context of banking deregulation and intensified banking competition in China, firms' access to banking has dramatically improved. This paper employs the geographical distribution of bank branches surrounding firms to measure their banking accessibility. The results find that access to banking significantly increases corporate dividend payout levels, which remains robust after addressing endogeneity concerns and conducting a series of robustness checks. Mechanism tests reveal that higher access to banking intensifies bank competition, dampening banks' bargaining power, and increasing firms' credit accessibility, thus further improving the corporate dividend payout ratio. In addition, the positive effect is more pronounced in non-state-owned firms and high-growth firms. Further analysis finds that increasing access to banking can mitigate corporate dividend discontinuity, and the higher dividend payout resulting from improved banking accessibility does not lead to under-investment problems. This study highlights the crucial role of access to banking in shaping corporate dividend policy and provides important implications for banking sector reform and investor protection.