Corporate Governance in China: Cash Dividends and Tunneling by Non-tradable controlling shareholders

Yan Xiong, Nancy Tsai & Jin Zhang

Abstract

It has been acknowledged in academia that the agency conflict between controlling owners and the minority shareholders are difficult to mitigate through conventional corporate control mechanisms due to the weak legal systems in the emerging market . As a member of the emerging market, this conflict is even more evident in China due to its unique property rights structure. The first objective of this study is to investigate this conflict in a unique setting in the Chinese stock market where the controlling shareholders are prohibited from selling their shares in the open market.