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Dividends and tunneling: evidence from family firms in China

  • Feng Xu'nan

Purpose–The purpose of this paper is to empirically analyze the motive of family-controlled firms to pay cash dividends in China. Design/methodology/approach–Using some econometrical models, the paper designs and conducts a series of empirical research on cash dividends behavior, thus acquiring credible empirical data. Findings–Using a sample of 204 family firms, the motive of family-controlled firms to pay cash dividends was investigated. Dividend ratio was found to decrease with the separation of ultimate ownership and control right; this may reflect the tunneling motive of the family owners. Different from others, it was also found that high-growth firms pay more dividends and that the family doing so may want to build a high reputation for the friendly treatment of minority investors for future financing. Practical implications–The paper discusses investor protection matters in China. Originality/value–The paper' findings provide policy implications for corporate governance reform and capital market development in China.

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Article provided by Emerald Group Publishing in its journal China Finance Review International.

Volume (Year): 1 (2011)
Issue (Month): 2 (April)
Pages: 152-167

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Handle: RePEc:eme:cfripp:v:1:y:2011:i:2:p:152-167
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