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How does privatization affect cash dividends? Quasi-experimental evidence from China

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  • Hu, Jinshuai
  • Jiang, Haiyan
  • Wu, Yibing

Abstract

Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

Suggested Citation

  • Hu, Jinshuai & Jiang, Haiyan & Wu, Yibing, 2023. "How does privatization affect cash dividends? Quasi-experimental evidence from China," Emerging Markets Review, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:ememar:v:57:y:2023:i:c:s1566014123000808
    DOI: 10.1016/j.ememar.2023.101075
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    More about this item

    Keywords

    Privatization; Dividend; Tunnelling; Free cash flow; China;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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