Dual-Class Share Structure on the Dividend Payout Policy: Evidence From China

Abstract

This study investigates the impact of dual-class share structure on the dividend payout policy of Chinese Concepts Stocks listed on US stock exchanges. We find that dual-class share structure is negatively associated with both the propensity to pay dividends and dividend payout ratios. Among firms with a dual-class share structure, the divergence in voting and cash-flow rights is negatively associated with the propensity to pay dividends and dividend payout ratios. We further find that dual-class firms experience more tunneling to controlling shareholders. Our findings highlight the potential cost of adopting dual-class share structures in China.