Abstract
This paper investigates the relationship between listed firms’ dividend policies and mutual funds’ investment decisions in China. We find that all types of mutual funds prefer to invest in companies that distribute earnings by way of dividends. Robustness checks show that mutual funds prefer cash dividends to stock dividends, but they are not particularly attracted to firms that pay high cash or high stock dividends. We further show that all types of mutual funds can positively influence listed firms’ cash dividend pay-out rates, but only transient (short-term) funds influence stock dividend increases of listed firms.
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