Can Air Pollution Reshape Corporate Dividend Policy? Evidence from China

28 Pages Posted: 15 Sep 2022

See all articles by Weiping Li

Weiping Li

Sun Yat-sen University

Qianlin Dong

affiliation not provided to SSRN

Shuyi Cheng

Zhejiang University of Finance & Economics

Xiaohang Ren

University of Southampton

Abstract

Based on China-listed firms, we investigate the relationship between air pollution and dividend payout. We document that air pollution promotes firms to pay higher dividends, and address the endogeneity by regression discontinuity design (RDD) and instrument variable (IV) regression. Furthermore, air pollution exacerbates information asymmetry and drives more public attention. In response, firms increase their dividend payments. Our results reject the hypothesis that air pollution increases dividends payout by enlarging a firm’s financial constraints and cash flow uncertainty. Cross-sectional analysis shows that the increase in dividend payout is weaker in state-owned enterprises, but is not affected by the heavily-polluting industries.

Keywords: Air pollution, dividend payout, information asymmetry

Suggested Citation

Li, Weiping and Dong, Qianlin and Cheng, Shuyi and Ren, Xiaohang, Can Air Pollution Reshape Corporate Dividend Policy? Evidence from China. Available at SSRN: https://ssrn.com/abstract=4219561 or http://dx.doi.org/10.2139/ssrn.4219561

Weiping Li

Sun Yat-sen University ( email )

Guangzhou
China

Qianlin Dong

affiliation not provided to SSRN ( email )

No Address Available

Shuyi Cheng

Zhejiang University of Finance & Economics ( email )

Xiaohang Ren (Contact Author)

University of Southampton ( email )

Southampton Business School
Southampton
United Kingdom

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