Abstract
This study comparatively examines the dividends behavior in state-controlled firms versus family-controlled firms. With the sample of large industrial firms listed on the Main Board of Hong Kong Stock Exchange, we investigate the dividends payment rates, stability of dividends payment, the effects of firm size, profitability and growth opportunity on likelihood to pay dividends, as well as the concentration of dividend in state-controlled versus family-controlled firms. Based on the findings, we derive some ethical implications of dividends policy regarding the differences in business ethical behavior, corporate social responsibility, corporate governance, business sustainability, and shareholder activism in state-controlled versus family-controlled firms, as well as the improvement in these respects through cross-listing in Hong Kong.
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Notes
The State Administration of Taxation announced in 2008 that it would levy a 10% withholding tax on dividends paid to non-resident enterprises by Chinese firms starting from the fiscal year of 2008, and Chinese firms cross-listed in HK started collecting the dividend tax accordingly.
For example, a survey by the Ministry of Finance China finds that 98.7% of Chinese companies falsified their earnings in the annual reports in 2000 (Xu and Ho 2002).
For example, as described by World Bank policy note (Kuijs et al. 2005), before 1993, revenue from China’s state-owned enterprises was a component of government budget revenue in China.
In view of the absence of a SOE dividend policy since 1994, the State Council launched a reform in 2007 that aims to collect dividend from central SOEs and channel it to a State Capital Management Budget (SCMB) on a pilot basis.
For example, in China most SOEs did not pay dividends until the State Council issued “Opinions of the State Council on the Pilot Implementation of the State Capital Operating Budget” which requires the SOEs to pay dividends from 2008 onwards.
We omit the case in which several firms are controlled by one family for simplicity.
The ultimate ownership data collected by Claessens et al. (2000) are posted on the website of Journal of Financial Economics in the “Data and programs used in JFE papers”.
We have also conducted the analysis of likelihood to pay dividends in state and family controlled firms for the years of 2003−2006, respectively, and the results (not tabulated here) are qualitatively similar as the result for the year of 2007.
The quotations are from the website of Cheung Kong (Holdings) Limited.
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Acknowledgments
We would like to express our sincere gratitude to Thomas Clarke (Section Editor) and four anonymous reviewers for their insightful guidance, helpful suggestions and useful comments. All remaining errors are our own.
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He, T.T., Li, W.X.B. & Tang, G.Y.N. Dividends Behavior in State- Versus Family-Controlled Firms: Evidence from Hong Kong. J Bus Ethics 110, 97–112 (2012). https://doi.org/10.1007/s10551-011-1150-0
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DOI: https://doi.org/10.1007/s10551-011-1150-0