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Political uncertainty, dividend policy adjustments and market effects

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  • Guangyong Lei
  • Wenzhong Wang
  • Mo Liu

Abstract

By studying Chinese firms that issued A-shares in the Shanghai and Shenzhen markets from 2004 to 2010, we examine how political uncertainty, caused by a change of Party chief at the municipal level, affects firms’ cash dividend decisions. We find that political uncertainty leads to a more prudent cash dividend policy. First, non-dividend-payers are less likely to initiate dividends due to political uncertainty. Secondly, political uncertainty significantly reduces the level of dividend payments. Compared with privately-owned firms, state-owned firms are more likely to adopt prudent cash dividend policies. The prudent adjustments of cash dividend policies due to political uncertainty have significant positive market effects.

Suggested Citation

  • Guangyong Lei & Wenzhong Wang & Mo Liu, 2015. "Political uncertainty, dividend policy adjustments and market effects," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 3(1), pages 49-83, January.
    • Handle: RePEc:taf:rcjaxx:v:3:y:2015:i:1:p:49-83
    DOI: 10.1080/21697213.2015.1015370
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    Cited by:

    1. Wei Yu & Jianjun Jia & Ying Zheng, 2023. "Political uncertainty and corporate working capital in China," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 927-966, October.

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