How does privatization affect cash dividends? Quasi-experimental evidence from China

Jinshuai Hu, Haiyan Jiang and Yibing Wu

Emerging Markets Review, 2023, vol. 57, issue C

Abstract: Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

Keywords: Privatization; Dividend; Tunnelling; Free cash flow; China (search for similar items in EconPapers)
JEL-codes: G35 G38 M41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:57:y:2023:i:c:s1566014123000808

DOI: 10.1016/j.ememar.2023.101075

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