Ownership Structure And Dividend Pay-out Policy Of Chinese Listed Company

In most Anglo-Saxon countries like the US or UK stock ownership is often dispersed and it is claimed that each individual shareholder has only limited incentives and ability to monitor the management. The major con1ict in the governance of companies, accordingly, appears to be between powerful managers and small outside shareholders. Dividend pay-outs are seen as a means to reduce the cash 1ow that managers can use at their discretion (Jensen, 1986; Lang and Litzenberger, 1989). Governance in most other countries functions di6erently. In Japan and most of the South East Asian countries, business groups with their pyramidal and cross-ownership structures are common governance devices. In these countries legal requirements for management, often part of the controlling family, are rather weak (Claessens et al., 2000). In Continental Europe a concentrated ownership structure is the distinguishing feature and the corporate law again plays a minor role. Here, large shareholders have ample incentives and ability to control management, therefore, the classic manager–shareholder con1ict does not appear predominant. Due to the reduction of the free-rider problem of monitoring and/or the increased alignment of incentives, large shareholders potentially add value. Many authors, however, argue that there is a con1ict between the large controlling shareholder and small minority shareholders. That is, while largeshareholders may increase the size of the pie, private benefits of control that are not shared by minority shareholders may also increase (Boehmer ,1998).In China, the controlling shareholders hold either state or institutional shares that are not tradable in the stock exchanges although all other rights are identical to those of the individual shares.1 Thus, these non-tradable shares have a significant price discount comparing with that of the individual shares. And just the phenomenon of "the same share,the same right, but the different price"leads to the separating of the different shareholders' benefits. This share price difference gives rise to disproportionate return to investment that favors the controlling shareholders over the individual shareholders. Foreseeing this, the controlling shareholders are less constrained when they issue shares since first, they enjoy a discounted price, and second, they can get back disproportionate more money once dividends are distributed. This phenomenon would be more severe in firms with worse corporate governance. Our results indicate the share and ownership structures of the Chinese listed firms do have significant impact on their dividend policies,and this effect can't be described as a simple linear relationship.On the one hand,dividends can be considered to constrain insider expropriation, on the other hand, due to the weak investor protection and disproportionate return from cash dividends that favors the controlling shareholders, dividends may be used as a way to tunnel resources from the listed companies to the controlling owners.In the analysis, there are so many regression equals that the conclusions can be described as followed:The relationship of payout and the untradble shares'proportion(or the first large shareholder'proportion) can be described as "inverse U"shape. Althought negative correlation of them is so significant, it will be considered that there is a curve at the beginning of the negative correlation in this paper.If the proportion of the tradble shares is hither, then the pressure of the firms will be heavier. It is different to this that if the second large and the third large shareholder' proportion increase, the firms will decrease the dividends.The firms with large size tend to pay out more dividends, the firms with high leverage tend to pay out less dividends. When the profits of firms increase significantly, the payout ratio will drop, but the payout sums will enhance.It is usual in China that the board chairman and the general manager is the same one, and the conclusion is drawn that if they are not the same one ,then the fi...