The role of managerial ownership in dividend tunneling: Evidence from China
研究发现中国上市公司中，管理层持股比例越高，控股股东越可能通过现金股利进行隧道挖掘，而分析师关注能有效约束这种合谋行为。
Abstract Research Question/Issue We examine the role of corporate executives in dividend tunneling activity by controlling shareholders and whether the correlation between executive ownership and dividend tunneling is influenced by internal and external governance mechanisms. Research Findings/Insights We find increased executive ownership may lead to a higher level of dividend tunneling. This is further strengthened by our finding that the positive effect of executive ownership on dividend tunneling is more pronounced for firms with weaker minority shareholder protection. In addition, our results show that higher degrees of state ownership may further intensify this positive association. Finally, we find that analyst coverage has a moderating effect and constrains the collusion between controlling shareholders and executives in dividend tunneling activity. Theoretical/Academic Implications Our study contributes to the literature on the role of managerial ownership in controlling shareholders' dividend tunneling activity. We fill a gap in the literature on the corporate agency problem by providing evidence that dividends have been employed by controlling shareholders as a means of tunneling and that executives with higher ownership are more likely to collude with controlling shareholders in dividend tunneling activities. Practitioner/Policy Implications This study contributes to the debates around the promotion of the cash dividend policy in China, as our findings show that cash dividends are used as a tunneling vehicle. Providing important evidence to regulators, our findings support the argument that external monitoring by financial analysts can effectively constrain dividend tunneling by dominant shareholders, especially in the context of emerging stock markets with high ownership concentration, weak minority shareholder protection, and an underdeveloped legal system.