Dividend Policy, Corporate Governance and Stock Liquidity

54 Pages Posted: 26 Feb 2015  

Rulu Pan

University of Queensland - Business School

Jing Shi

RMIT University - School of Economics, Finance and Marketing

Qiaoqiao Zhu

Australian National University (ANU) - College of Business and Economics; Financial Research Network (FIRN)

Date Written: February 26, 2015

Abstract

This paper examines the effect of corporate governance and stock liquidity on corporate payout policy in the context of the split-share structure reform initiated in 2005 in China. In this reform, non-tradable shares were converted into tradable shares compulsorily. The reform removed a liquidity constraint; meanwhile it facilitated a better alignment of the interests of the controlling shareholders with those of the outside investors. These lead to significant improvements in firms’ liquidity and governance. We find that on average, cash dividends decrease significantly after the reform. The reduction in payouts is more pronounced for firms with higher growth rates and liquidity. In terms of cash dividends, a larger decline in the post-reform periods is observed in firms that are controlled by state shareholders.

Suggested Citation

Pan, Rulu and Shi, Jing and Zhu, Qiaoqiao, Dividend Policy, Corporate Governance and Stock Liquidity (February 26, 2015). Asian Finance Association (AsianFA) 2015 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2570868 or http://dx.doi.org/10.2139/ssrn.2570868

Rulu Pan (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Jing Shi

RMIT University - School of Economics, Finance and Marketing ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria 3000
Australia

Qiaoqiao Zhu

Australian National University (ANU) - College of Business and Economics ( email )

Canberra, Australian Capital Territory 2601
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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