Analysis On Corporate Governance And Cash Dividend Policy Of Family Controlled Listed Company

The corporate governance and cash dividend paying behavior of listed company are becoming emphasis of academic community. Among all cash dividend paying behavior theories, Agent Cost theory is relatively more mature currently. While recently, the coming up of Exploration Hypothesis provides some totally contrary explanation. This paper investigates the relationship between corporate governance and cash dividend paying behavior of listed family control companies in China, based on Agent Cost theory and introducing Exploration Hypothesis, and tries to find proof of the fact that large shareholders are using their control right to explore private benefits.In a cross data regression setting which contains 156 listed family control companies in 2004, this paper relates three forms of cash dividend payout ratios to a wide group of corporate governance variables that characterize the sample firms. The major finding is that the cash dividend payout policy of family control companies is significantly related to corporate governance of the companies. The voting rights of ultimate controlling shareholder have a "U" relationship with dividend payout ratio. Deviations from the one-share-one-vote rule due to pyramidal structures are also associated with higher dividend payout ratio. Moreover, larger holdings of the second largest shareholder increase the dividend payout ratio. The results of this paper call for better minority shareholder rights protection and increased transparency of corporate governance of family control companies.