Share pledging, social trust and cash dividend payout: evidence from China

Paying less cash dividend is one type of pledging shareholders' opportunistic behaviour. Previous literature leaves unclear evidence about the impacts of share pledging on such firm-level decisions. Using the data of listed firms between 2014 and 2020 in China, we fill this void by examining th...

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Bibliographic Details
Published inApplied economics letters Vol. ahead-of-print; no. ahead-of-print; pp. 1 - 7
Main Authors Hu, Weijia, Teng, Shi, Lin, Yu-En, Li, Yuan
Format Journal Article
LanguageEnglish
Published London Routledge 15.12.2023
Taylor & Francis LLC
Subjects
cash dividend payout
Companies
Dividends
Economic analysis
Emerging markets
hierarchical linear model
Linear analysis
Share pledging
social trust
Stockholders
China
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Summary:Paying less cash dividend is one type of pledging shareholders' opportunistic behaviour. Previous literature leaves unclear evidence about the impacts of share pledging on such firm-level decisions. Using the data of listed firms between 2014 and 2020 in China, we fill this void by examining the relationship between share pledging and cash dividend payouts from the perspective of social trust. Using a Heckman two-stage model, we find that share-pledging firms are less likely to pay cash dividend and the cash dividend payout is negatively related to pledged shares. We employ a hierarchical linear model and find that the level of social trust positively moderates the relationship between share pledging and cash dividend payout. Further, we find the effect is more pronounced for firms with higher free cash flows. The results indicate that social trust reduces the moral risk of pledging shareholders of listed firms in emerging market.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2022.2118217