Do dividends signal safety? Evidence from China |
| |
| Institution: | 1. School of Finance, Central University of Finance and Economics, China;2. School of Finance, Central University of Finance and Economics, Shahe Higher Education Park, Changping District, Beijing 102206, China;1. School of Management and Engineering, Nanjing University, Nanjing, Jiangsu 210093, China;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;3. School of Management, Shanghai University of Engineering Science, Shanghai 201620, China;4. Faculty of Business, Athabasca University, Athabasca, Alberta T9S 3A3, Canada;5. Odette School of Business, University of Windsor, Windsor, Ontario N9B 3P4, Canada;1. Birmingham Business School, University of Birmingham, Edgbaston, Birmingham B15 2TY, United Kingdom;2. School of Management and Economics, Cyprus University of Technology, Lemesos 3036, Cyprus;1. School of Statistics and Mathematics, Central University of Finance and Economics, Beijing 100081, China;2. School of Finance, Central University of Finance and Economics, Beijing 100081, China |
| |
| Abstract: | Our paper examines whether dividends convey information about future cash-flow volatility in the Chinese stock markets. We observe that dividend changes are followed by cash-flow-volatility changes in the opposite direction. Taking advantage of the unique context of China, we show, in both the two-way sorting analysis and the regression analysis, that the strong relation between changes in dividend and cash-flow volatility is robust after controlling for potential confounders, including firm-level financial market frictions, macroeconomic and market conditions, and government intervention in firms' decision-making, and holds after we control for endogeneity concerns. Furthermore, we perform the theoretic mechanism tests of the relation and present supporting evidence on the signaling theory under the setting of asymmetric information, instead of the free cash flow theory based on the assumption of agency conflict. This study enriches our understanding of the source and nature of cash-flow information contained in dividends. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
