Minority shareholder voting and dividend policy

Abstract

We find that minority shareholders’ voting opposition to dividend proposals is associated with significantly higher cash dividend payout in the following year for stocks listed in Shanghai Stock Exchange. When minority shareholders’ voting opposition increases, the likelihood and frequency of regulatory penalties increase. The reverse happens after firms increase dividend payout. Minority shareholders’ voting opposition has a stronger positive effect on cash dividend payout when they post more messages in stock forums and when independent directors express dissenting opinions. The effect is weaker if the board chair or CEO has political connections. Minority shareholders’ voting opposition does not have significant effects on the growth rate of earnings and the level of earnings management. But we do find evidence that minority shareholder voting opposition reduces expropriation by major shareholders. The evidence supports a hypothesis that regulators use the minority shareholder voting results to screen out possible cases of shareholder oppression.