How does privatization affect cash dividends? Quasi-experimental evidence from China

Jinshuai Hu; Haiyan Jiang; Yibing Wu

doi:10.1016/j.ememar.2023.101075

How does privatization affect cash dividends? Quasi-experimental evidence from China

Jinshuai Hu, Haiyan Jiang^*, Yibing Wu

^*Corresponding author for this work

Department of Accounting and Corporate Governance

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Abstract

Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

Original language	English
Article number	101075
Number of pages	18
Journal	Emerging Markets Review
Volume	57
DOIs	https://doi.org/10.1016/j.ememar.2023.101075
Publication status	Published - Dec 2023

Bibliographical note

Copyright © 2023 The Authors. Published by Elsevier B.V. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

China
Dividend
Free cash flow
Privatization
Tunnelling

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Cite this

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title = "How does privatization affect cash dividends? Quasi-experimental evidence from China",

abstract = "Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.",

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N2 - Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

AB - Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

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How does privatization affect cash dividends? Quasi-experimental evidence from China

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