Abstract
Based on tunneling theory and principal-agent theory, setting 2008 to 2014 listed companies in China as samples, this paper explores the relationship between largest shareholders’ shareholdings and cash dividends, and meanwhile, identifies the supervisory directors according to their office and education background to analyze the influence of supervision role of board to the relationship between the largest shareholding and cash dividends. The empirical results show that the higher the shareholdings of the largest shareholder, the more cash dividends per share. In addition, the higher the proportion of supervisory directors, the smaller the influence of the largest shareholding on cash dividends, which means supervisory directors can inhibit the tunneling behavior of the largest shareholders to a certain extent, and the board of directors play a role of supervision.
Highlights
Profit distribution is one of the three core activities of enterprise financial management, affecting the capacity of continuous operation and the returns of investors
In order to further inspect whether supervisory directors can play a supervision role in inhibiting the tunneling behaviors of the large shareholders, divide all the samples into 5 groups according to the percentage of supervisory directors, and test supervision effects by group regression
Author analyses the relationship between the shareholding of largest shareholders and cash dividends firstly
Summary
Profit distribution is one of the three core activities of enterprise financial management, affecting the capacity of continuous operation and the returns of investors. In addition to distributing cash dividend, the way to tunneling includes occupation of funds, connected transaction and loan in assurance. The relationship between largest shareholding and cash dividends has been analyzed, and the motivation of distributing cash dividends of listed companies in China has been explored . When the large shareholders tend to tunnel the company, the board should supervise and control the distribution level of cash dividends. Chen et al (2014) suggested the independent directors could constrain the tunneling behavior of large shareholders and play a positive role in supervision [3] Based on those literatures, this paper tries to study whether the board can restrain the behavior of tunneling through analyzing the background of the board member
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