Gender and other major board characteristics in China: Explaining corporate dividend policy and governance

Abstract

This study examines the association between Chinese stock issuers’ board characteristics and dividends. We focus on the gender of CEO and accompanying board members, as well as other salient board demographics and characteristics. Using more than 9,000 firm-year observations, we observe little difference in the dividend distributions of female- and male-led Chinese firms. Other salient demographics, notably CEO age and tenure bear a strong positive association with cash distributions. Cash pay-out is also increasing in directors’ equity stakes and state ownership. In a general sense, the proportion of independent directors on boards bears only limited association with cash pay-out. However, in state-invested entities, greater independent director presence acts as a brake against cash distributions. We challenge a lingering perception in the investment literature that women are significantly more risk-averse than men. Cross-cultural theory suggests that risk aversion is manifest in greater cash retention and thus lower pay-outs (Bae, Chang, & Kang, The Journal of Financial Research, 35(2): 289–316, 2012; Khambata & Liu, Journal of Asia-Pacific Business, 6(4): 31–43, 2005). Building on this literature, and extending it specifically to gender, our results are consistent with male and female CEOs displaying comparable levels of risk aversion. They are also congruent with “financial knowledge” lessening gender-based differences in risk aversion (Hibbert, Lawrence, & Prakash, Global Finance Journal, 24: 140–152, 2013) and/or its general absence in the specific field of financial decisions (Schubert, Brown, Gysler, & Brachinger, The American Economic Review, 89(2): 381–385, 1999). We also emphasize theory on managerial power (Allen, Social Forces, 60(2): 482–494, 1981) and entrenchment. Results for CEO tenure and age support notions of CEO entrenchment, while those for duality do not. In contrast to agency theory, but consistent with tunneling arguments, the present study stresses the overarching role of state-ownership in increasing (decreasing) cash (stock) payouts. We observe non-monotonic effects in this relation, thus extending related findings elsewhere (Huang, Chen, & Kao, Asia Pacific Journal of Management, 29: 39–58, 2012).