تبعیض نژادی مالکیت سهام، ترجیحات سهامداران، و سیاست تقسیم سود در چین

We investigate how listed Chinese firms pay different types of dividend to satisfy shareholders, different dividend preferences shaped by institutional factors such as share tradability and asymmetrical taxation. We find that the cash dividend level is significantly and positively related to the proportion of non-publicly tradable shares and this relation is mainly driven by legal person shareholders' preferences for cash dividends. In contrast, the stock dividend level is significantly and positively associated with the proportion of publicly tradable shares. These findings provide an empirical rationale for the current reform on the segregation of equity ownership rights in China.

There has been a sustained academic interest in examining the determinants of dividend policy (e.g., Baker and Wurgler, 2004, Faccio et al., 2001 and Graham and Kumar, 2006). However, cash dividends and stock dividends are often studied separately.1 One consequence of this segregation is that we have limited knowledge about how management and shareholders choose between cash dividends and stock dividends, why cash dividends paying companies do not issue stock dividends, why stock dividends paying companies do not issue cash dividends, and why some companies pay both cash dividends and stock dividends. Moreover, the statistically significant determinants identified by studying stock dividends or cash dividends separately may no longer be statistically significant when both are considered. The literature has also paid little attention to shareholder preferences for stock dividends (Frankfuter & Lane, 1998). In contrast, shareholder preferences for cash dividends have attracted much more attention as can be seen from several theories such as clientele theory (Miller & Modigliani, 1961), ‘bird-in-hand’ theory (Gordon, 1963), self-control theory (Shefrin & Statman, 1984), and the more recent catering theory (Baker & Wurgler, 2004). However, these theories might have limited ability to explain shareholder preferences for stock dividends. Moreover, prior empirical studies focus on shareholder preferences for different levels of cash dividends rather than their preferences for cash dividends over stock dividends. As a result, there is little knowledge about why some shareholders in certain countries such as China, Netherlands, and South Korea prefer stock dividends and why those shareholders in prior studies who prefer a certain level of cash dividends do not prefer stock dividends. In order to provide more comprehensive and robust empirical evidence, unlike prior studies, we examine the determinants of both cash dividends and stock dividends. In particular, we control for cash dividends when we examine stock dividends and similarly we control for stock dividends when we examine cash dividends. We also adopt a shareholder preferences perspective. That is, we examine how shareholders' different preferences affect companies' choice of paying out through cash dividends only, through stock dividends only, or through both cash and stock dividends. Our study is set in a Chinese context where the payment of stock dividends is a significant feature of Chinese companies' dividend policy (Chen & Yuan, 2004). Indeed, about 34 percent of listed Chinese companies paid stock dividends while some 47 percent paid cash dividends from 1993 to 2006. These figures strongly reflect the segregation of ownership structure in listed Chinese firms. On the one hand, there exists a large proportion of non-publicly tradable shares (NPTS) held by government agencies, state-owned enterprises (SOE) and other institutions. They are twice the size of publicly tradable shares (PTS) that are held by private investors and foreign investors and can be traded publicly on the stock exchange. Unlike PTS holders, NPTS holders do not benefit from capital gains arising from share price changes in the secondary market and also tend to be large and thus have both powers and incentives to expropriate corporate wealth through cash dividend payments to support their non-profit making units (Lee & Xiao, 2002). On the other hand, unlike NPTS holders who do not enjoy capital gains, PTS owners would prefer stock dividends to cash dividends because the former can generate significant tax free capital gains and because it is difficult for the investors to use a cash dividend to mirror a stock dividend on the nascent stock market.

This paper investigates dividend payouts in China from a shareholder preferences perspective. Extending recent studies on shareholder preferences for different levels of cash dividends by Baker and Wurgler, 2004 and DeAngelo and DeAngelo, 2000, and Graham and Kumar (2006), we have investigated shareholders' preferences for different types of dividends. Consequently, we have found that managers in listed Chinese companies pay different types of dividend (stock dividends versus cash dividends) to different shareholders to satisfy their preferences. Our study shows the need to consider stock dividends as well as cash dividends in studying shareholders' dividend preferences. This is especially important in an environment like China where both cash dividends and stock dividends are an important means of dividend payment. In so doing, our shareholder preferences theory provides a fuller explanation of dividend payment behaviour and shareholder preferences in China. First, we observe a significant and negative relation between cash dividends and stock dividends which suggests a substitution effect. Second, we obtain more robust results because otherwise the size of coefficients and level of statistical significance would be different for some important variables included in our models. For example, when cash dividends are the dependent variable without controlling for prior year and current year stock dividends, the size of coefficients for NPTS and LEGAL and their level of statistical significance are different from those reported in Table 3 and Table 4. Similar changes would occur to PTS when stock dividends are the dependent variable without controlling for prior year and current year cash dividends Moreover, the inclusion of both stock dividends and cash dividends enables us to explain not only why shareholders prefer cash or stock dividends, but also why they do not prefer stock or cash dividends which have been largely neglected in prior studies. Specifically, our empirical results based on both the random-effects panel regressions and MNL models confirm the prediction that the cash dividend payment level is significantly and positively related to the proportion of NPTS. This finding reflects NPTS holders' preferences for cash dividends over stock dividends. They do so because their shares are not publicly tradable and they thus do not have the opportunities of earning capital gains from trading stock dividends. This is also because they are usually large and cash-thirsty and thus have both powers and incentives to expropriate cash dividends to support their not-for-profit units. However, because cash dividends for owners of state shares are paid to the National Treasury while the cash dividends for legal person shareholders are paid to themselves, we find that the proportion of state shares is indifferent to the level of cash dividend payment whereas there is a significant and positive relation between the proportion of legal person ownership and the level of cash dividends. In contrast, our findings support the prediction that the stock dividend payment level is significantly and positively associated with the proportion of PTS. This result reflects PTS owners' preference for stock dividends over cash dividends. These shareholders do so because their shares are tradable, and there is a high demand for equity shares implying that stock dividends could give rise to capital gains which are tax free for PTS holders, an effect of tax bias well documented in the literature (e.g., Short et al., 2002). It is also because shareholders consider stock dividends as a substitute for cash dividends, thus confirming the same observation in the literature (Lakonishok & Lev, 1987). Overall, these findings reflect some unique features and deep-seated deficiencies in China's institutional arrangements and thus enhance our understanding of its economic system (e.g., ownership) and the operation of its listed companies and capital market. They show that NPTS holders' strong preference for cash dividends and PTS holders' strong preference for stock dividends are driven by share tradability and related asymmetrical tax regulation. As a result, large NPTS holders seek short-term cash dividends while PTS holders look for capital gains, both at the expense of the companies' long-term growth. These findings and their implications support the Chinese government's current reform on equity ownership segregation by converting NPTS into PTS.