Dividend tunnelling and joint expropriation: empirical evidence from China's capital market.

Lv, Huaili, Li, Wanli and Gao, Simon S (2012) Dividend tunnelling and joint expropriation: empirical evidence from China's capital market. The European Journal of Finance, 18 (3-4). pp. 369-394. ISSN 1351-847X

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This paper examines the association between cash dividends and the shareholders balancing mechanism (SBM) using the exogeneity and endogeneity assumptions of corporate ownership structure. This paper identifies, in the case of China, whether paying cash dividends is a means of protection or expropriation of minority shareholders’ interests. With 4810 observations from companies listed on the Shanghai Stock Exchange over the period 2004–2008, the authors find significant negative associations between cash dividend payments and the SBM of non-controlling large shareholders under the exogeneity assumption and the SBM of tradable shareholders under the endogeneity assumption. The findings suggest that cash dividends are used as a manner of tunneling by the controlling shareholder. This paper also shows that the SBM of non-controlling shareholders has a significant positive effect on cash dividends, especially for companies paying high and abnormal dividends. The results imply that in China's capital market, cash dividend payments are not only expropriations of minority shareholders’ interests by the controlling shareholder but also coalitions of controlling and non-controlling large shareholders. The findings confirm the tunneling and joint expropriation incentive of corporate dividend policy

Item Type: Article
Print ISSN: 1351-847X
Electronic ISSN: 1466-4364
Additional Information: Published online only 15/04/12
Uncontrolled Keywords: corporate ownership; dividend tunneling; joint expropriation; shareholders coalition; shareholders balancing mechanism;
University Divisions/Research Centres: The Business School > School of Accounting, Financial Services and Law
Dewey Decimal Subjects: 300 Social sciences > 330 Economics > 332 Financial economics
Library of Congress Subjects: H Social Sciences > HG Finance
Item ID: 4915
Depositing User: Mrs Lyn Gibson
Date Deposited: 23 Jan 2012 16:23
Last Modified: 18 Jun 2012 12:54

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