Cash dividends, expropriation, and political connections: Evidence from China

This study uses a panel data analysis to examine the dividend policy at Chinese firms, which appears to be strongly motivated by agency costs and political connections. We find that firms that pay less in cash dividends are associated with more related-party transactions, which represents wealth expropriation from general stockholders. Also, politically connected firms pay higher cash dividends than non-politically connected firms. Further analysis shows that the ownership structures of these Chinese firms play a critical role in the dividend policies with respect to related-party transactions and political connections.