 Innovation or dividend payout: Evidence from ChinaBao Yang, Hsin-I Chou and Jing Zhao International Review of Economics & Finance, 2020, vol. 68, issue C, 180-203 Abstract: Since 2001, the China Securities Regulatory Commission has implemented a series of policies to ensure that dividend payments constitute a prerequisite of equity financing, which is known as the semi-mandatory dividend policy. Using a sample of Chinese listed firms from 2007 to 2015, we demonstrate that firms with more R&D investments tend to pay more dividends. This can be explained by the semi-mandatory dividend policy and the equity dependence of R&D investments. R&D firms are more likely to have equity financing needs and they have strategic incentives to pay dividends in order to access external equity markets. Such pay-for-financing incentives are stronger for firms with lower cash holdings and higher internal financing deficit. We further demonstrate equity financing needs as the underlying mechanism for R&D investments to positively affect dividend payout. In addition, we show that such semi-mandatory dividend payments adversely affect firm value and sustainable growth. Keywords: R&D investments; Dividend payout; Semi-mandatory dividend policy; China; Equity financing (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:reveco:v:68:y:2020:i:c:p:180-203 DOI: 10.1016/j.iref.2020.03.008 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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