Abstract:
Using A shares public corporates listing in SH and SZ, this paper examines how the market reacts differently to the dividend policy between high and low internal control quality firms. We find that when the internal control quality is high, the cumulative abnormal return has a significant positive association with the dividend policy. However, when the internal control quality is low, there is no significant association between the cumulative abnormal return and the dividend policy. These results only exist in state-owned firms and firms in fierce product market competition industries. Therefore, we conclude that investors have different attitudes toward the dividend policy of firms with different internal control quality. The findings of paper provide guidance to both the managers and regulators.
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