Dividend policy of corporations operating in emerging markets is significantly different from the dividend policy of corporations operating in developed markets. The relationship between dividend policy and agency cost has been a recent development in the corporate finance theory focusing on the issue of how dividend policy can be use in reducing the agency cost. The have been theoretical and empirical results support the agency cost theory in explaining the dividend policy behavior in developed countries and East Asia. This study provides evidence from the China's stock market and analyzes empirically whether agency cost is the main concern for listed firms to distribute cast dividend to minority shareholders. Unlike the positive supports for agency cost theory in other papers, we foun...[ Read more ]

Dividend policy of corporations operating in emerging markets is significantly different from the dividend policy of corporations operating in developed markets. The relationship between dividend policy and agency cost has been a recent development in the corporate finance theory focusing on the issue of how dividend policy can be use in reducing the agency cost. The have been theoretical and empirical results support the agency cost theory in explaining the dividend policy behavior in developed countries and East Asia. This study provides evidence from the China's stock market and analyzes empirically whether agency cost is the main concern for listed firms to distribute cast dividend to minority shareholders. Unlike the positive supports for agency cost theory in other papers, we found agency cost theory is not suitable in explaining the dividend policy behavior of listed companies in China's stock market. Moreover, the empirical results show that the government is monitoring the deeds of managers and take roles as large shareholder such that the interest of minority shareholders could be protected.