Dividends, investment and cash flow uncertainty: Evidence from China

Lu Deng, Sifei Li, Mingqing Liao and Weixing Wu

International Review of Economics & Finance, 2013, vol. 27, issue C, 112-124

Abstract: This paper investigates the relation between dividends and investment for Chinese listed firms in a condition of cash flow uncertainty. We find that facing cash flow uncertainty, Chinese firms neither cut dividends nor cut investment, but maintain extremely high level of investment. External financing is the only instrument that resolves cash flow uncertainty. We further find that there is an “N-shaped” nonlinear relation between dividends and investment given different levels of cash flow uncertainty. These results can be explained by China's special institutional settings in which firms have strong incentives to spend capital on both dividend payout and make investment.

Keywords: Dividend; Investment; Cash flow uncertainty (search for similar items in EconPapers)
JEL-codes: G31 G35 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:27:y:2013:i:c:p:112-124

DOI: 10.1016/j.iref.2012.09.005

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