Dividend preference of tradable-share and non-tradable-share holders in Mainland China

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Comprehensive data on corporate announcements of Chinese firms allows us to examine the preference for, and determinants of, cash and stock dividends. The results indicate that Chinese public investors prefer stock dividends over cash dividends, which are preferred by large state and legal person shareholders generally. Stock dividends, which do not require an explicit cash outflow from a firm, are found to be positively related to higher earnings, supporting the signalling hypothesis of dividend policy. In an imperfect market, these results have some implications for government regulation of financial markets.

Keywords: Cash dividend; D82; Dividend signal; G14; M41; Non-tradable share; Stock dividend

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-629X.2008.00284.x

Affiliations: 1: School of Accounting and Finance, Hong Kong Polytechnic University, Hong Kong 2: College of Business Administration, University of Missouri, St. Louis, MO 63121-4400, USA 3: Department of Accountancy, City University of Hong Kong, Hong Kong

Publication date: June 1, 2009

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