Research On The Relationship Between Ownership Structure, Corporate Governance And Dividend Policy Of Chinese Private Listed Companies

The agency theory indicates that, dividends payments can help to solve the conflicts of interests between management and shareholders. The’Tunneling’ theory believes that conflicts between the controlling and small-and-medium-sized shareholders should be the dominating agency problem within a company, since the controlling shareholders have motivation to use dividends payment as a way of transferring corporate resources, some of them even ignore the resources needs for potential company investment and growth opportunities.In China, after the reform of non-tradable shares in2006, the stock holding costs of the controlling and small-and-medium-sized shareholders started to converge. This should have a positive signal on investors’protection. However, since Chinese state-owned enterprises are influenced more by governments and lose some of their market characteristics, this paper only use Chinese privately-owned listed companies as sample, through regression analysis, cross variable analysis, to test whether company ownership structure and corporate governance practice can affect dividend policies. In conclusion, the more stock the controlling shareholder holds, the more dividends the company will pay; the lack of a good corporate governance practice, the more dividends the company will pay. As government has set up more and more regulations governing the tunneling activities, controlling shareholders tend to use their power to ask other large shareholders to collude with them as an indirect way to transfer resources out of the company.