Corporate dividend behavior under uncertainty: A study of Chinese firms

Abstract

This paper investigates the impact of Trade Policy Uncertainty (TPU) on the cash dividend policies of Chinese firms from 2000 to 2019. The findings reveal that TPU negatively influences firms' cash dividend policies, prompting firms to reduce cash dividends under heightened uncertainty. Furthermore, firms and industries in different regions exhibit varied responses to TPU's effects on cash dividends. In R&D-intensive firms, the study finds a consistent negative impact of TPU on cash dividends, regardless of whether the firms face financial constraints. Conversely, firms with reduced R&D spending and financial constraints tend to increase cash dividends under TPU, potentially due to agency-related issues. Overall, TPU significantly affects firms' cash dividend policies, and these effects remain robust when accounting for R&D intensity, financial constraints, and agency problems. This study provides valuable insights, highlighting the importance of incorporating cash dividend policies into corporate strategies during periods of high uncertainty.