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Ultimate Controlling Shareholders and Dividend Payout Policy in Chinese Stock Market

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  • Jianan Guo

    (Deakin University Department of Finance, 221 Burwood HWY, Burwood, VIC 3125, Australia)

Abstract

Departing from the traditional cash flow rights-dividend policy framework, this study investigates whether the level of control rights and the types of ultimate controlling shareholders (UCSs) of listed firms in China influence their cash dividend payout. We find that the level of control rights is positively associated with both the probability to pay and the level of cash dividend payout, which indicates that UCSs use cash dividends to reduce the agency cost of free cash flow and redirect listed firms’ cash balance. Furthermore, different types of UCSs influence dissimilarly on the controlled firms’ cash dividends, which can be attributed to the backgrounds of these UCSs originating from China’s unique partial share issuance privatization process.

Suggested Citation

  • Jianan Guo, 2016. "Ultimate Controlling Shareholders and Dividend Payout Policy in Chinese Stock Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-35, June.
    • Handle: RePEc:wsi:rpbfmp:v:19:y:2016:i:02:n:s0219091516500089
    DOI: 10.1142/S0219091516500089
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