Mandatory dividend policy and perk consumption: Evidence from state-owned business groups in China

Lihua Liu and Haicheng Shu

Journal of International Financial Markets, Institutions and Money, 2022, vol. 77, issue C

Abstract: This study examines perk consumption in a business group when unlisted parent firms experience an adverse shock in their financial conditions. We exploit a quasi-experiment in China, the mandatory dividend policy of a state-owned business group starting in 2007, to conduct difference-in-differences estimation. We find that: (1) When parent central state-owned enterprises (parent CSOEs) are required to pay dividends to the government, their group-affiliated listed central state-owned enterprises (listed CSOEs) experience a substantial decrease in perk expenditures. (2) Further analyses show that the association between the mandatory dividend policy and perks is stronger in firms with a higher level of resource dependence on the business group and firms within the business group with higher resource allocation ability. (3) Our findings are more pronounced for firms with better internal and external governance. Overall, we provide the empirical evaluation of the economic consequences of the mandatory dividend policy in terms of a firm’s perks within a state-owned business group.

Keywords: Mandatory dividend policy; Perks; Business group; China (search for similar items in EconPapers)
JEL-codes: G31 G34 M41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443122000270
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:77:y:2022:i:c:s1042443122000270

DOI: 10.1016/j.intfin.2022.101536

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().