Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/187616 
Year of Publication: 
2010
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 3 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2010 [Pages:] 71-93
Publisher: 
Elsevier, Amsterdam
Abstract: 
This study solves the dispute between the free cash flow and tunneling hypotheses in explaining the role of cash dividends on asset expropriation of the controlling shareholders in Chinese listed firms. Investors value more the cash dividends and the cash holdings of firms with lower ownership control than those of firms with higher ownership control. This is more consistent with the tunneling hypothesis. However, when investment opportunities are considered, the free cash flow hypothesis better explains firms' dividend policy. Investors value more the cash dividends of firms with fewer investment opportunities and higher probability of expropriation. This study indicates that investors are concerned with the potential asset expropriation through cash payouts, unless firms possess high growth opportunities.
Subjects: 
Cash holdings
Cash dividends
Ownership control
Asset tunneling
Agency problems
JEL: 
G32
G34
G35
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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