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State Controlling Shareholders and Payout Policy

Published online by Cambridge University Press:  13 October 2022

Chen Lin ,
Hang Liu ,
Chenkai Ni Open the ORCID record for Chenkai Ni [Opens in a new window]  and
Bohui Zhang
Chen Lin
Affiliation:
Hong Kong University Faculty of Business and Economics chenlin1@hku.hk
Hang Liu
Affiliation:
Dongbei University of Finance and Economics School of Accountancy liuhang@dufe.edu.cn
Chenkai Ni*
Affiliation:
Fudan University School of Management
Bohui Zhang
Affiliation:
The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen) School of Management and Economics and Shenzhen Finance Institute bohuizhang@cuhk.edu.cn
*
nichenkai@fudan.edu.cn (corresponding author)
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Abstract

We study the role of state controlling shareholders in corporate payout policy. The State Capital Operation Program in China requires parent central state-owned enterprises (CSOEs) to contribute part of their consolidated income to a new fiscal fund. We find that listed CSOEs, partially controlled by parent CSOEs, experience significant reductions in dividend payouts as the income-contribution ratio increases. The dividend reductions are concurrent with increases in intragroup resource transfers—listed CSOEs’ loans to, and commercial trades with, group peers. The program yields adverse consequences for listed CSOEs’ investment and employment, yet being mitigated by group-level dividend reductions.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 5 , August 2023 , pp. 1943 - 1972
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Mara Faccio (the editor), Bin Ke, Mingzhu Tai (CICF discussant), and workshop participants at the 2018 China International Conference in Finance, Chongqing University and Sun Yat-sen University for their helpful comments. Lin acknowledges the financial support from the Research Grant Council of the Hong Kong Special Administrative Region, China (Project No. 17504117). Liu and Ni acknowledge the financial support from the National Natural Science Foundation of China (Project No. 71772029, 72172037). All authors have contributed to this paper equally.

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