Local corruption and dividend policy: Evidence from China

In this study, we first predict that local corruption increases the risk of expropriation by governments, thus encouraging appropriation of minority shareholders by controlling shareholders, and consequently reducing dividend payouts. Then, using a sample of Chinese A-share listed companies from 1998 to 2017, we empirically identify that local corruption negatively affects corporate dividend payouts. Further study shows that this effect is more pronounced in stateowned enterprises and enterprises within secure investor protection environments. Finally mechanism analysis supports our theoretical prediction that local corruption can reduce dividend payouts through the expropriation by controlling shareholders.