The Impact of Shareholding Structure on Firms’ Dividend Decisions: Evidence from Chinese Listed Companies

Abstract

Investigating the impact of three types of state ownership on firms’ dividend pay-out decisions for the first time, this study focuses on the differences in dividend pay-out behavior among various state ultimate owners. It has been found that the state enterprises supervised by lower level state agencies, as well as those affiliated to local governments are more likely to pay a dividend than the firms controlled by private ultimate owners. Central enterprises are no more likely to instigate a dividend pay-out as ultimate owners than the firms controlled by private ultimate owners. Similar patterns are found regarding the impact of ultimate owners’ cash rights and voting rights on dividend pay-out decisions. To a certain extent, central enterprises behave more similarly to private firms than other types of government controlled firms. No expropriation is detected in all kinds of firms controlled by the state as ultimate controlling shareholders via corporate pyramids, although weak evidence is found for firms owned by private investors. It is also inferred that paying dividends is no longer a necessary condition to get permissions of rights issues.

Keywords: state enterprise; central enterprise; non-negotiable share; ultimate owner

JEL Classification: G35; G32