Dividends, investment and cash flow uncertainty: Evidence from China
AbstractThis paper investigates the relation between dividends and investment for Chinese listed firms in a condition of cash flow uncertainty. We find that facing cash flow uncertainty, Chinese firms neither cut dividends nor cut investment, but maintain extremely high level of investment. External financing is the only instrument that resolves cash flow uncertainty. We further find that there is an “N-shaped” nonlinear relation between dividends and investment given different levels of cash flow uncertainty. These results can be explained by China's special institutional settings in which firms have strong incentives to spend capital on both dividend payout and make investment.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 27 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620165
Dividend; Investment; Cash flow uncertainty;
Find related papers by JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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