Tak Yan Leung

Dividend preference of tradable-share and non-tradable-share holders in Mainland China

Comprehensive data on corporate announcements of Chinese firms allows us to examine the preference for, and determinants of, cash and stock dividends. The results indicate that Chinese public investors prefer stock dividends over cash dividends, which are preferred by large state and legal person shareholders generally. Stock dividends, which do not require an explicit cash outflow from a firm, are found to be positively related to higher earnings, supporting the signalling hypothesis of dividend policy. In an imperfect market, these results have some implications for government regulation of financial markets.

Corporate Performance Implications of Relational Demographic Differences: On Age and Titles of Chairpersons Versus General Managers of Listed Chinese Companies

By analysing archival data of 5451 Chinese listed companies, this investigation offers insights into how the relational demographic differences between the highest ranking executives (chairperson and general manager) may affect corporate performance in a Chinese cultural context. Overall, the findings derived from the regression analyses reveal that, for status-laden demographic attributes such as age and title possession, relational-norm-consistent demographic differences lead to better corporate performance. In addition, the findings highlight that relational demographic homogeneity in terms of title possession also boosts corporate performance. Furthermore, this investigation provides empirical evidence for the significant moderating effect of industry sales growth on the relationship between the relational demographic difference in title possession and corporate performance. The finding suggests the importance of adopting a contingent approach to appoint the chairperson and general manager in line with relevant industry conditions.

Ownership Structure and Corporate Earnings in China

The market setting of the Chinese securities markets is unique because of: (1) a mandatory requirement to release reported earnings within 120 days after the fiscal year ends; (2) a practice of announcing earnings and dividends simultaneously; and (3) a high percentage of shares in the hands of state-owned and legal-person shareholders. This article explores the relation between ownership structure, earnings performance, and announcement timing of Chinese listed firms. Overall results indicate that the percentage of nontradable shares is negatively related to announcement timeliness, and positively related to unexpected earnings increase, unexpected cash dividend increase, and firm size. Consistent with the findings of previous research, this study provides evidence that the market reacts favorably to early rather than late announcement. Firms with high percentages of nontradable shares are larger firms and have better earnings performance, and hence these firms tend to release earnings information earlier.

Insider Trading Activities Before the Simultaneous Announcements of Earnings and Dividends

We employ a sample of 3,177 events from Hong Kong industrial firms during the 1993–1999 period to examine insider trading activities around earnings and dividends announcements. By controlling for earnings management, special dividends, and other firm level financial indicators, we find that the presence of insider trading, its trading direction, and its trading intensity are related to the signals of these simultaneous earnings and dividends announcements. Various tests show that our findings are robust regardless of the proxies used for measuring insider trading activities, earnings, and dividend changes.

What Drives the Cash Dividend Policy of the Poorly Performing Firms in Hong Kong

We use financial data on poorly performing firms in Hong Kong to examine the motives behind paying out cash dividends when they suffer an earnings decline. We test three hypotheses behind the cash dividend policy: the maturity hypothesis, the free cash flow hypothesis, and the self-interest hypothesis of directors (i.e., the cash channeling hypothesis of directors). The findings are largely consistent with the maturity hypothesis and the free cash flow hypothesis but do not support the cash channeling hypothesis, confirming good market transparency and governance of the Hong Kong market.

State Ownership, Legal Institution, and Independent Director Compensation: An Exploratory Study in China

This study examines the determinants of independent director compensation in China, with particular interest in the impact of state ownership and legal institutions. Controlling for the characteristics of directors, boards, and firms, we find independent director compensation is positively related to attributes of a director’s human and social capital such as education, effort, professional expertise, and connections (guanxi). We show that independent director pay is determined differently across ownership structures. Independent directors are paid less in companies owned by local government units, and independent directors in such companies are paid less in a region with more greatly developed legal institutions. This study contributes to the limited literature on independent director compensation by extending beyond the market economies to explore the determinants of independent director compensation in a transitional economy such as China. It also adds to the literature on legal institutions by examining the impact of legal development on compensation. Finally, this study informs the public of the current compensation practice, which will facilitate future policy making.

Top Executive Pay in China

Research on executive compensation has exploded in recent years, and this volume of specially commissioned essays brings the reader up-to-date on all of the latest developments in the field. Leading corporate governance scholars from a range of countries set out their views on four main areas of executive compensation: the history and theory of executive compensation, the structure of executive pay, corporate governance and executive compensation, and international perspectives on executive pay.