How do talented managers view dividend policy? Further evidence from Chinese equity market

Abstract

Purpose The purpose of this paper is to examine the importance of market imperfection, namely, variation in managerial ability (MA), on dividend policy in China. The authors focus on the Chinese market as it is dominated by state-owned enterprises and test whether the association between MA and dividend policy varies systematically with the degree of state ownership. Design/methodology/approach To measure MA, this study exploits a novel measure developed by Demerjian et al. (2012) to estimate how efficiently manager utilizes firm’s resources. Manager efficiency is defined in terms of output a manager produces based on inputs available within firm. Findings The authors find that relationship between MA and dividend policy is primarily driven by non-state own enterprises compare to state own enterprises, more prevalent for financially unconstrained firms with strong balance sheet and more pronounced under high marketized groups as compare to low marketized groups. These finding are robust under battery of robustness checks. This research adds new insight for the policy makers and investors to pay more attention on MA. Practical implications This research adds new insight for the policy makers and investors to pay more attention on MA. Originality/value This study augments the dividend policy literature by relaxing perfect capital market assumption of Miller and Modigliani, and neo-classic view of firms by incorporating a new novel factor – variation in MA – and applies it to the emerging market of China.

Confucianism culture and corporate cash holdings

“…Our findings elaborate that Confucianism is less likely to play its role in SOEs. Thus, our results complement studies that suggest that the nature of enterprise (SOEs and non-SOEs) is an important attribute of Chinese firms (Sarwar et al, 2019;Du, 2015;Jiang et al, 2010;Khan et al, 2019;Su et al, 2017).…”

The impact of ownership structure on dividend policy of listed firms in Jordan

“…Furthermore, the study uses the Probit model to analyze the impact of ownership structure on the propensity to pay dividend, the Probit model is a method to execute regression for dichotomous outcome variable. We introduce a dummy variable to analyze the relationship between ownership structure and the propensity to make dividend payment through Probit regression model in consistency with Sarwar et al (2019). Table 8 shows similar results for the impact of ownership structure on dividend policy as reported in Table 7.…”

Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

“…Investors prefer more financial expertise on the board because they have to perform numerous roles, including improvement of financial reporting quality, financial statement's transparency, and prevention of controlling shareholder's internal control [87,88]. Financial experts on board help monitor the ability and potential of management towards financial decisions and provide experience-based reviews on policies [38,89]. Furthermore, to reduce the firm's agency conflict, they can work as arbitrators among external and internal auditors [90].…”