DIVIDENDS, CONTROLLING SHAREHOLDERS AND FIRM PERFORMANCE: AN INVESTIGATION OF LARGE FIRMS ON THE HONG KONG STOCK EXCHANGE

This study examines whether dividends payout has a positive contribution to firm performance while taking into account the important firm level characteristics such as the divergence between the control rights and the ownership rights of controlling shareholders and firm leverage. Investigating the large firms listed on the Main Board of Hong Kong Stock Exchange over the 1998–2007 period, we find that dividends payout has statistically significantly positive impacts on both return on assets (ROA) and Tobin's Q, particularly after controlling for the nonlinear relation between dividends and firm performance and between control rights of the controlling shareholder and firm performance. The regression results do not show significant interaction effect between dividends payout and control divergence on firm performance. But the impact of dividends payout on firm performance is different in family controlled firms versus state controlled firms and varies with institutional factors.