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Cash dividends, expropriation, and political connections: Evidence from China

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  • Su, Zhong-qin
  • Fung, Hung-Gay
  • Huang, Deng-shi
  • Shen, Chung-Hua

Abstract

This study uses a panel data analysis to examine the dividend policy at Chinese firms, which appears to be strongly motivated by agency costs and political connections. We find that firms that pay less in cash dividends are associated with more related-party transactions, which represents wealth expropriation from general stockholders. Also, politically connected firms pay higher cash dividends than non-politically connected firms. Further analysis shows that the ownership structures of these Chinese firms play a critical role in the dividend policies with respect to related-party transactions and political connections.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:260-272 DOI: 10.1016/j.iref.2013.05.017
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    3. 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.
    4. Shen, Chung-Hua & Lin, Chih-Yung & Wang, Yu-Chun, 2015. "Do strong corporate governance firms still require political connection, and vice versa?," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 107-120.
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    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.
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    9. Lou, Fang & Wang, Jiwei & Yuan, Hongqi, 2014. "Causes and consequences of corporate asset exchanges by listed companies in China," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 205-217.
    10. Thitima Sitthipongpanich, 2016. "The influence of the CEO and the largest shareholder on dividend payout policy in Thailand," Proceedings of Business and Management Conferences 3405493, International Institute of Social and Economic Sciences.
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    12. 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.

    More about this item

    Keywords

    Cash dividends; Political connections; Related party transactions;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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