Dividend payout policies in the pre and post split share structure reform in China

This paper examines the motivation of dividend payout policies for Chinese listed firms before and after the Split Share Structure Reform in China from the corporate governance-related viewpoint. Analysis was carried out using panel data with random effect from a sample of firms listed on the A-share Chinese market in the period of 2001-2004 (before the reform) and 2014-2017 (after the reform). It is found that (1) the incentive of tunnelling via dividend by controlling shareholders is weaken after the reform; (2) dividends are taken as a measure to reduce agency problems caused by free cash flows after the reform; (3) dividends after the reform become more stable than those before the reform. (4) in general, the market reacts positively to the increase of dividend both before and after the reform. It can be concluded that dividend policies are taken as the measure of minority shareholder protection and signalling rather than expropriation after the reform. This paper contributes to the literature by comparing dividend payout policies during the full circulation era with that before the reform was initiated.