Controlling shareholder, split-share structure reform and cash dividend payments in China

We investigated the relationship between changes in cash dividend payments, non-public tradable shares, and the percentage ownership of the controlling shareholder in Chinese firms before and after the split-share structure reform. We found a significant reduction in cash dividends before and after the reform. Importantly, the reduction in cash dividends is significantly related to the reduction in the largest shareholder's ownership; however, it is not associated with the decline in non-publicly tradable shares. These results suggest that Chinese controlling shareholders' preference for cash dividends is attributable to the inherent illiquidity of their shares rather than non-tradability of shares.