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Local corruption and dividend policy: Evidence from China

Author

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  • Dong, Bin
  • Chen, Yizi
  • Fan, Cunbin

Abstract

In this study, we first predict that local corruption increases the risk of expropriation by governments, thus encouraging appropriation of minority shareholders by controlling shareholders, and consequently reducing dividend payouts. Then, using a sample of Chinese A-share listed companies from 1998 to 2017, we empirically identify that local corruption negatively affects corporate dividend payouts. Further study shows that this effect is more pronounced in state-owned enterprises and enterprises within secure investor protection environments. Finally mechanism analysis supports our theoretical prediction that local corruption can reduce dividend payouts through the expropriation by controlling shareholders.

Suggested Citation

  • Dong, Bin & Chen, Yizi & Fan, Cunbin, 2022. "Local corruption and dividend policy: Evidence from China," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000277
    DOI: 10.1016/j.frl.2022.102698
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    References listed on IDEAS

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    Cited by:

    1. Tran, Quoc Trung & Nguyen, Van Phong & Dang, Duong Huy Chuong & Nguyen, Ba Phong & Le, Phuong Linh, 2023. "Local corruption and capital structure," Finance Research Letters, Elsevier, vol. 55(PB).
    2. Tao, Miaomiao & Dagestani, Abd Alwahed & Goh, Lim Thye & Zheng, Yuhang & Le, Wen, 2023. "Do China's anti-corruption efforts improve corporate productivity? A difference-in-difference exploration of Chinese listed enterprises," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    3. Hasan Tekin, 2023. "Does Corruption Matter For Corporate Payouts In The Covid Era? Evidence From Muslim Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(4), pages 617-636, November.
    4. Ma, Liangbo, 2023. "Corporate social responsibility reporting in family firms: Evidence from China," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    5. Dyussembina, Saule & Park, Kunsu, 2024. "Book-tax differences, dividend payout, and firm value," International Review of Financial Analysis, Elsevier, vol. 91(C).
    6. Muhammad Ansar Majeed & Tanveer Ahsan & Ammar Ali Gull, 2024. "Does corruption sand the wheels of sustainable development? Evidence through green innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4626-4651, July.

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    More about this item

    Keywords

    Local corruption; Dividend policy; Natural experiment; Tunneling;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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