Unintended benefits of mandatory dividend regulations on investment efficiency: evidence from China

Raymond Siu Yeung Chan, Lyu Fan*, Byron Y. Song

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate the unintended benefits of mandatory dividend payout regulations for Chinese listed firms seeking refinancing to enhance their investment efficiency, even though the initial intention of these regulations is to protect powerless external minority shareholders. We find that, while these regulations mitigate the overinvestment of all listed firms, this effect is more pronounced among refinancing firms than among non-refinancing firms. We further find evidence partially showing that the mitigating effect of these regulations on overinvestment is driven mainly by state-owned enterprises (SOEs). These findings suggest dividend payout regulations are used to partially ameliorate Chinese listed firms’ investment inefficiency, particularly those of SOEs.

Original languageEnglish
Pages (from-to)1461-1493
Number of pages33
JournalAccounting and Finance
Volume62
Issue numberS1
Early online date22 Jul 2021
DOIs
Publication statusPublished - Apr 2022

Scopus Subject Areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)

User-Defined Keywords

  • China
  • Dividend payout
  • Investment efficiency
  • Overinvestment
  • State-owned enterprises

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