Abstract:
This paper analyzes the relationship between cash dividends and stock price crash risk in China’s listed firms, combining the effects of actual controlling shareholders’ control rights structure. We find that the over-payment of cash dividends is positively related with stock price crash risk. In addition, the divergence between control rights and cash flow rights aggregates the positive relationship between cash dividends and crash risk. The empirical results reflect the shareholder’s governance effects embedded in cash dividend policy. Simply increasing cash dividend distribution ratio might not be an effective method to protect investors. For regulators, the real core is to improve corporate governance, so that the dividend policy can truly conform to the interests of all the shareholders, rather than be manipulated by some specific shareholder.
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