 Institutional stock ownership and firms’ cash dividend policies: Evidence from ChinaMichael Firth, Jin Gao, Jianghua Shen and Yuanyuan Zhang Journal of Banking & Finance, 2016, vol. 65, issue C, 91-107 Abstract: Agency theory suggests that outside shareholders prefer higher dividend payouts in order to reduce the free cash flows of firms that are under the insiders’ control. Our study investigates the effects of mutual funds, typically the most important and influential type of outside shareholder, on firms’ dividend payouts in China during the period from 2003 to 2011. We find that mutual funds influence firms to pay higher cash dividends. The results are consistent with the predictions from exit theory. The effects are more pronounced in firms controlled by state and regional governments and in firms with relatively higher free cash flows. We also find evidence that the mutual funds’ effects are stronger when their investment horizon is longer and the ownership interest is larger. Other institutional investors, such as banks, insurance companies, and securities companies have a lower exit threat and do not have an influence on firms’ cash dividend payments or financial performances. Keywords: Institutional ownership; Mutual funds; Dividend policy; Exit theory (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:65:y:2016:i:c:p:91-107 DOI: 10.1016/j.jbankfin.2016.01.009 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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