Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms

According to classic corporate governance theory, strengthening large shareholders’ cash flow rights without changing their control rights should reduce expropriation incentives by better aligning their interests with those of minority shareholders. However, due to the weaker investor protections an...

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Main Author:	Hang Liu
Format:	article
Language:	EN
Published:	Elsevier 2021
Subjects:	Corporate governance Dividend tax Expropriation Firm value Large shareholders Accounting. Bookkeeping HF5601-5689
Online Access:	https://doaj.org/article/92e6e5cbc5e34f06b6b4465656611330
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id	oai:doaj.org-article:92e6e5cbc5e34f06b6b4465656611330
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spelling	oai:doaj.org-article:92e6e5cbc5e34f06b6b44656566113302021-11-26T04:25:54ZDoes strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms1755-309110.1016/j.cjar.2021.100206https://doaj.org/article/92e6e5cbc5e34f06b6b44656566113302021-12-01T00:00:00Zhttp://www.sciencedirect.com/science/article/pii/S1755309121000484https://doaj.org/toc/1755-3091According to classic corporate governance theory, strengthening large shareholders’ cash flow rights without changing their control rights should reduce expropriation incentives by better aligning their interests with those of minority shareholders. However, due to the weaker investor protections and low dividend payouts of listed firms in China, large shareholders typically extract private benefits instead of seeking shared benefits through dividends. They therefore care more about control rights than cash flow rights. An empirical study using the exogenous changes of two rounds of dividend tax reductions reveals that strengthening the largest shareholders’ cash flow rights leaves their expropriation activities unchanged and firm value does not increase. However, when other shareholders supervise the largest shareholder, expropriation activities ease significantly.Hang LiuElsevierarticleCorporate governanceDividend taxExpropriationFirm valueLarge shareholdersAccounting. BookkeepingHF5601-5689ENChina Journal of Accounting Research, Vol 14, Iss 4, Pp 100206- (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Corporate governance Dividend tax Expropriation Firm value Large shareholders Accounting. Bookkeeping HF5601-5689
spellingShingle	Corporate governance Dividend tax Expropriation Firm value Large shareholders Accounting. Bookkeeping HF5601-5689 Hang Liu Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
description	According to classic corporate governance theory, strengthening large shareholders’ cash flow rights without changing their control rights should reduce expropriation incentives by better aligning their interests with those of minority shareholders. However, due to the weaker investor protections and low dividend payouts of listed firms in China, large shareholders typically extract private benefits instead of seeking shared benefits through dividends. They therefore care more about control rights than cash flow rights. An empirical study using the exogenous changes of two rounds of dividend tax reductions reveals that strengthening the largest shareholders’ cash flow rights leaves their expropriation activities unchanged and firm value does not increase. However, when other shareholders supervise the largest shareholder, expropriation activities ease significantly.
format	article
author	Hang Liu
author_facet	Hang Liu
author_sort	Hang Liu
title	Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
title_short	Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
title_full	Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
title_fullStr	Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
title_full_unstemmed	Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms
title_sort	does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? evidence from china’s dividend tax reforms
publisher	Elsevier
publishDate	2021
url	https://doaj.org/article/92e6e5cbc5e34f06b6b4465656611330
work_keys_str_mv	AT hangliu doesstrengtheninglargeshareholderscashflowrightsreducetheirexpropriationmotivationevidencefromchinasdividendtaxreforms
_version_	1718409916089106432

Does strengthening large shareholders’ cash flow rights reduce their expropriation motivation? Evidence from China’s dividend tax reforms

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