Chinese and Global ADRs: The US Investor Experience

Bessembinder, Hendrik; Chen, Te-Feng; Choi, Goeun

doi:10.1080/0015198x.2021.1915087

Cited by 2 publications

(1 citation statement)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The main purpose of the law is to protect interests of US investors. Bessembinder et al . (2021) show that ADRs in general have outperformed US stocks, with ADRs of Chinese companies doing particularly well, suggesting it would be “ironic” to prevent promising Chinese companies from listing in the US In contrast, this study suggests delisting Chinese-government controlled firms would help protecting US investors from Chinese-government's dividend tunneling practices, to say the least.…”

Section: Discussionmentioning

confidence: 99%

Signaling or tunneling: the dividend policies of Chinese ADRs listed in the US

Zhao

2023

IJMF

View full text Add to dashboard Cite

PurposeThis study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where strong institutional governance and weak firm-level governance coexist.Design/methodology/approachChinese American Depository Receipts (ADRs) listed in the US offer an excellent opportunity to study dividend policy where strong institutional governance and weak firm-level governance coexist. Using a sample of 161 Chinese ADRs from 2004 to 2018, this study examines the relationship between the firm's ownership structure and cash dividend policy.FindingsThis study shows that high levels of controlling shareholder ownership and high levels of state ownership are associated with high dividend payouts. A high level of controlling shareholder ownership has a negative effect on its firm value. Dividend payments in those firms mitigate the negative effect, consistent with the signaling (substitution) model. A high level of state ownership is beneficial to its firm value. However, high dividend payment in those firms decreases the benefit, supporting the tunneling model.Practical implicationsThis study covers 161 Chinese ADRs listed in the US with a total market capitalization of over $2 trillion and reveals that dividend tunneling could occur in Chinese government controlled ADRs. Findings in this study would offer valuable insights for US investors and regulators.Originality/valueThis paper extends the tunneling hypothesis to the topic of dividend policy in a setting where strong institutional governance and weak firm-level governance coexist. This study shows that tunneling through dividends can happen among Chinese government controlled ADRs in the US. It also complements the literature by extending the examination of the dividend tunneling model from a relatively small universe of master limited partnership (Atanssov and Mandell, 2018) to a larger universe of Chinese ADRs listed in the US with a total market capitalization over $2 trillion US dollars.

show abstract

Section: Discussionmentioning

confidence: 99%