State-owned enterprises dividend policy and subsidiary internationalization: A study based on the secondary agency problem

Drawing upon agency theory, we delve into the relationship between the dividend distribution of parent state-owned enterprises (SOEs) and the internationalization of their subsidiaries. Taking the promulgation of China's mandatory dividend policy as an exogenous shock to the dividend growth of parent SOEs, our research reveals an adverse impact of this policy on the international expansion of subsidiaries. This adverse effect intensifies as the dividend ratio of parent firms escalates. Mechanism analysis highlights that the transfer of resources from subsidiaries, facilitated by controlling shareholders through related-party transactions and intercorporate loans, constitutes a crucial channel through which the mandatory dividend policy impacts the internationalization of subsidiaries. Further research shows that when the degree of separation between control and ownership rights of controlling shareholders is greater, the internal and external governance environment of the firm is poor, and the level of industry competition is lower, the adverse effect of the policy on the internationalization of subsidiaries is more significant. Overall, our analysis sheds light on how the economic conduct of parent SOEs shapes the internationalization strategies of their subsidiaries, thereby advancing the understanding of internationalization theories in emerging market economies.