The role of managerial ownership in dividend tunneling: evidence from China
The role of managerial ownership in dividend tunneling: evidence from China
Research Question/Issue: We examine the role of corporate executives in dividend tunneling activity by controlling shareholders and whether the correlation between executive ownership and dividend tunneling is influenced by internal and external governance mechanisms. Research Findings/Insights: We find increased executive ownership may lead to a higher level of dividend tunneling. This is further strengthened by our finding that the positive effect of executive ownership on dividend tunneling is more pronounced for firms with weaker minority shareholder protection. In addition, our results show that higher degrees of state ownership may further intensify this positive association. Finally, we find that analyst coverage has a moderating effect and constrains the collusion between controlling shareholders and executives in dividend tunneling activity. Theoretical/Academic Implications: Our study contributes to the literature on the role of managerial ownership in controlling shareholders' dividend tunneling activity. We fill a gap in the literature on the corporate agency problem by providing evidence that dividends have been employed by controlling shareholders as a means of tunneling and that executives with higher ownership are more likely to collude with controlling shareholders in dividend tunneling activities. Practitioner/Policy Implications: This study contributes to the debates around the promotion of the cash dividend policy in China, as our findings show that cash dividends are used as a tunneling vehicle. Providing important evidence to regulators, our findings support the argument that external monitoring by financial analysts can effectively constrain dividend tunneling by dominant shareholders, especially in the context of emerging stock markets with high ownership concentration, weak minority shareholder protection, and an underdeveloped legal system.
corporate governance, dividend tunneling, financial analysts, managerial ownership, state ownership
Bian, Huan
3290818d-fc94-4c8f-ae7b-7ac37d56617e
Kuo, Jing-ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Pan, Hui
b3efb9f3-9057-4129-b23e-9802e3b663a6
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
8 July 2022
Bian, Huan
3290818d-fc94-4c8f-ae7b-7ac37d56617e
Kuo, Jing-ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Pan, Hui
b3efb9f3-9057-4129-b23e-9802e3b663a6
Zhang, Zhuang
df7b9fa8-04fd-4085-b74d-c9c1506b974e
Bian, Huan, Kuo, Jing-ming, Pan, Hui and Zhang, Zhuang
(2022)
The role of managerial ownership in dividend tunneling: evidence from China.
Corporate Governance: An International Review.
(doi:10.1111/corg.12478).
Abstract
Research Question/Issue: We examine the role of corporate executives in dividend tunneling activity by controlling shareholders and whether the correlation between executive ownership and dividend tunneling is influenced by internal and external governance mechanisms. Research Findings/Insights: We find increased executive ownership may lead to a higher level of dividend tunneling. This is further strengthened by our finding that the positive effect of executive ownership on dividend tunneling is more pronounced for firms with weaker minority shareholder protection. In addition, our results show that higher degrees of state ownership may further intensify this positive association. Finally, we find that analyst coverage has a moderating effect and constrains the collusion between controlling shareholders and executives in dividend tunneling activity. Theoretical/Academic Implications: Our study contributes to the literature on the role of managerial ownership in controlling shareholders' dividend tunneling activity. We fill a gap in the literature on the corporate agency problem by providing evidence that dividends have been employed by controlling shareholders as a means of tunneling and that executives with higher ownership are more likely to collude with controlling shareholders in dividend tunneling activities. Practitioner/Policy Implications: This study contributes to the debates around the promotion of the cash dividend policy in China, as our findings show that cash dividends are used as a tunneling vehicle. Providing important evidence to regulators, our findings support the argument that external monitoring by financial analysts can effectively constrain dividend tunneling by dominant shareholders, especially in the context of emerging stock markets with high ownership concentration, weak minority shareholder protection, and an underdeveloped legal system.
Text
Manuscript - Dividend tunnelling
- Accepted Manuscript
Text
Corporate Governance - 2022 - Bian - The role of managerial ownership in dividend tunneling Evidence from China
- Version of Record
More information
Accepted/In Press date: 7 June 2022
e-pub ahead of print date: 8 July 2022
Published date: 8 July 2022
Additional Information:
Publisher Copyright:
© 2022 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.
Keywords:
corporate governance, dividend tunneling, financial analysts, managerial ownership, state ownership
Identifiers
Local EPrints ID: 467898
URI: http://eprints.soton.ac.uk/id/eprint/467898
ISSN: 0964-8410
PURE UUID: 8bd07f82-c004-4240-8ab7-dd266cf58390
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Date deposited: 25 Jul 2022 16:31
Last modified: 06 Jun 2024 01:58
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Author:
Huan Bian
Author:
Jing-ming Kuo
Author:
Hui Pan
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