Do Overpaid Dividends Drive Stock Price Crash Risk? Evidence from China

67 Pages Posted: 29 Jun 2022

See all articles by xiaoting ling

xiaoting ling

affiliation not provided to SSRN

Yuan George Shan

The University of Western Australia - UWA Business School

Wuqing Wu

Renmin University of China - School of Business

Lu Zhang

affiliation not provided to SSRN

Abstract

This study is motivated by the research gap concerning cash dividend payouts in China. To fill this gap, we explore the impact of overpaid dividends on future stock price crash risk. We use a dataset of 2,662 firms with 15,416 firm-year observations of China’s A-share listed firms for the period 2009–2018. The baseline empirical result indicates that overpaid dividends are positively related to the likelihood of future stock price crash risk. The results further suggest that high-quality corporate governance and financial analyst coverage can moderate the positive effect of overpaid dividends on the crash risk. These results are valid after use of the difference-in-difference test and instrumental variable approach. Further, continuous overpaid dividends and state-owned enterprises with overpaid dividends have a stronger impact on the crash risk, and overpaid dividends are significantly affected by their peer firms.

Keywords: Overpaid dividends, stock price crash risk, corporate governance, Analyst coverage, China

Suggested Citation

ling, xiaoting and Shan, Yuan George and Wu, Wuqing and Zhang, Lu, Do Overpaid Dividends Drive Stock Price Crash Risk? Evidence from China. Available at SSRN: https://ssrn.com/abstract=4149258 or http://dx.doi.org/10.2139/ssrn.4149258

Xiaoting Ling

affiliation not provided to SSRN

Yuan George Shan

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

Wuqing Wu (Contact Author)

Renmin University of China - School of Business ( email )

Beijing
China

Lu Zhang

affiliation not provided to SSRN ( email )

No Address Available

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