Dividend payment and ownership structure in the Chinese stock market

This study examines the relationship between dividend payment and ownership structure in the Chinese stock market. The findings show the following. First, government-controlled firms are not only more likely to pay dividends than corporate-controlled firms, but they also pay more dividends than corporate-controlled firms. Second, firms without multiple large shareholders pay more dividends than those firms with multiple large shareholders. Finally, dividend payout ratios are positively related to the ownership of the controlling shareholder. These findings are consistent with the “substitute model”, in which dividends are the substitute for legal protection of outsiders, and are paid to establish a reputation for the good treatment of outside shareholders. © City University of Hong Kong.