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Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China

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  • Bradford, William
  • Chen, Chao
  • Zhu, Song

Abstract

This paper investigates how the state-controlling ownership and the ownership through corporate pyramid structures affect the dividend policies of publicly listed firms in China. We find that the state-controlled firms in China pay higher dividends (measured by the dividend yield and the dividend payout ratio) than the privately controlled firms. We also find that as the control chain of the firm lengthens, the firm pays lower dividends. We conclude that the privately controlled firms in China pay lower dividends than the state-controlled firms because the former are more capital-constrained in obtaining external equity and long-term debt, other things being equal, and depend more on internal equity to finance growth. The negative association between the length of the control chain and dividends comes from a greater use of investable funds among Chinese firms under corporate pyramids, which is one of the features of the internal capital markets for firms under pyramid structures.

Suggested Citation

  • Bradford, William & Chen, Chao & Zhu, Song, 2013. "Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 445-464.
  • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:445-464
    DOI: 10.1016/j.iref.2013.01.003
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    References listed on IDEAS

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    Cited by:

    1. Beladi, Hamid & Chao, Chi Chur & Hu, May, 2016. "Another January effect—Evidence from stock split announcements," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 123-138.
    2. Cheng, Louis T.W. & Leung, T.Y. & Yu, Wayne, 2014. "Information arrival, changes in R-square and pricing asymmetry of corporate news," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 67-81.
    3. Paul McGuinness & Kevin Lam & João Vieito, 2015. "Gender and other major board characteristics in China: Explaining corporate dividend policy and governance," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 989-1038, December.
    4. repec:eee:iburev:v:26:y:2017:i:6:p:1100-1113 is not listed on IDEAS
    5. repec:vls:finstu:v:20:y:2016:i:1:p:6-20 is not listed on IDEAS
    6. Su, Zhong-qin & Fung, Hung-Gay & Huang, Deng-shi & Shen, Chung-Hua, 2014. "Cash dividends, expropriation, and political connections: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 260-272.
    7. Beladi, Hamid & Chao, Chi Chur & Hu, May, 2016. "A macro-analysis of financial decisions: An examination of special dividend announcements," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 162-181.
    8. Firth, Michael & Gao, Jin & Shen, Jianghua & Zhang, Yuanyuan, 2016. "Institutional stock ownership and firms’ cash dividend policies: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 91-107.
    9. repec:vul:omefvu:v:8:y:2017:i:1:id:218 is not listed on IDEAS
    10. Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Wong Woei-Chyuan, 2015. "Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 103-126.
    11. repec:eee:reveco:v:49:y:2017:i:c:p:17-57 is not listed on IDEAS
    12. repec:bla:apacel:v:30:y:2016:i:2:p:90-104 is not listed on IDEAS
    13. Shuangqi Wu & Simon Appleton & Lina Song & Jinmin Wang, 2017. "The Determinants of Virtue: Modelling Changes in the CSR Ratings of Chinese Firms," Working Papers id:12253, eSocialSciences.
    14. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2014. "Controlling shareholder, split-share structure reform and cash dividend payments in China," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 339-357.
    15. Berezinets, I. & Ilina, Y. & Alekseeva, L., 2014. "Ownership structure and dividend policy: A study of Russian public companies with dual class shares," Working Papers 6384, Graduate School of Management, St. Petersburg State University.
    16. Zhao, Yu Fang & Xia, Xin Ping & Tang, Xiang Xi & Cao, Wei & Liu, Xiao Yuan & Fan, Ying Han, 2015. "Private placements, cash dividends and interests transfer: Empirical evidence from Chinese listed firms," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 107-118.
    17. Hamdi Ben-Nasr, 2015. "Government Ownership and Dividend Policy: Evidence from Newly Privatised Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(5-6), pages 665-704, June.
    18. repec:taf:oabmxx:v:3:y:2016:i:1:p:1272815 is not listed on IDEAS

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