The Role of Managerial Ownership in Dividend Tunneling: Evidence from China

Huan Bian, Jing-Ming Kuo, Hui Pan, Zhuang Zhang

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)
103 Downloads (Pure)


Research Question/Issue
We examine the role of corporate executives in dividend tunneling activity by controlling shareholders and whether the correlation between executive ownership and dividend tunneling is influenced by internal and external governance mechanisms.

Research Findings/Insights
We find increased executive ownership may lead to a higher level of dividend tunneling. This is further strengthened by our finding that the positive effect of executive ownership on dividend tunneling is more pronounced for firms with weaker minority shareholder protection. In addition, our results show that higher degrees of state ownership may further intensify this positive association. Finally, we find that analyst coverage has a moderating effect and constrains the collusion between controlling shareholders and executives in dividend tunneling activity.

Theoretical/Academic Implications
Our study contributes to the literature on the role of managerial ownership in controlling shareholders' dividend tunneling activity. We fill a gap in the literature on the corporate agency problem by providing evidence that dividends have been employed by controlling shareholders as a means of tunneling and that executives with higher ownership are more likely to collude with controlling shareholders in dividend tunneling activities.

Practitioner/Policy Implications
This study contributes to the debates around the promotion of the cash dividend policy in China, as our findings show that cash dividends are used as a tunneling vehicle. Providing important evidence to regulators, our findings support the argument that external monitoring by financial analysts can effectively constrain dividend tunneling by dominant shareholders, especially in the context of emerging stock markets with high ownership concentration, weak minority shareholder protection, and an underdeveloped legal system.
Original languageEnglish
Pages (from-to)307-333
Number of pages27
JournalCorporate Governance: An International Review
Issue number2
Early online date8 Jul 2022
Publication statusPublished - Mar 2023

Bibliographical note

© 2022 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.


  • corporate governance
  • dividend tunneling
  • financial analysts
  • managerial ownership
  • state ownership

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation


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