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| Controlling Shareholders’ Share Pledging and Dividends Policy Choice of Listed Companies |
| LIAO Ke, CUI Chenyu, XIE Deren
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Economics and Management School of Wuhan University;
School of Economics and Management, Tsinghua University |
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Abstract Based on related data of firms listed on A-share market during 2003-2017, this paper investigates the relationship between the share pledging of controlling shareholders and dividend policies of listed firms. We document that, compared to firms without controlling shareholder pledging their shares(non-pledgors), there is an increasing likelihood of stock dividends(including stock splits) and a decreasing cash dividends among those firms with share pledging by the controlling shareholder(pledgors). Meanwhile, such relationship is more pronounced for firms with controlling shareholder pledging more shares or being faced with a higher risk of margin call. Based on the pledging activities of the insiders and considering their incentives, the paper reexamines the issue of dividend policy choice of firms, and provides incremental evidence of investors’ different preference to large stock splits over cash dividends.
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Received: 01 September 2016
Published: 01 November 2018
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