In times of crisis does ownership matter? liquidity extraction through dividends during the 2007–2009 financial crisis

Wei Huang; John W. Goodell; Abhinav Goyal

doi:10.1016/j.intfin.2021.101380

In times of crisis does ownership matter? liquidity extraction through dividends during the 2007–2009 financial crisis

Wei Huang
, John W. Goodell^*
, Abhinav Goyal

^*Corresponding author for this work

Department of Finance, Accounting and Economics

Research output: Journal Publication › Article › peer-review

14 Citations (Scopus)

Abstract

Liquidity flow between regions with different levels of temporary financial constraints has received insufficient attention. This study takes advantage of a natural opportunity: Chinese capital markets clearly distinguish between foreign direct investment firms and firms with foreign institutional investment. Using the distinctive categorization of institutional holding structures in China, we find that foreign controlled enterprises were associated with an extraordinary increase in dividend payouts during the Global Financial Crisis, with concomitant underinvestment. Our results suggest that foreign-controlling shareholders extracted liquidity through dividends, highlighting a previously ignored channel for global transference of liquidity, with concomitant agency costs.

Original language	English
Article number	101380
Journal	Journal of International Financial Markets, Institutions and Money
Volume	73
DOIs	https://doi.org/10.1016/j.intfin.2021.101380
Publication status	Published - Jul 2021

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities
SDG 17 Partnerships for the Goals

Free Keywords

Chinese capital markets
Dividends
Financial crises
Financial liquidity
Foreign direct investment
Foreign equity ownership

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.intfin.2021.101380

Cite this

@article{26815d5c8ac44bf391ac4dc8adf28a69,

title = "In times of crisis does ownership matter? liquidity extraction through dividends during the 2007–2009 financial crisis",

abstract = "Liquidity flow between regions with different levels of temporary financial constraints has received insufficient attention. This study takes advantage of a natural opportunity: Chinese capital markets clearly distinguish between foreign direct investment firms and firms with foreign institutional investment. Using the distinctive categorization of institutional holding structures in China, we find that foreign controlled enterprises were associated with an extraordinary increase in dividend payouts during the Global Financial Crisis, with concomitant underinvestment. Our results suggest that foreign-controlling shareholders extracted liquidity through dividends, highlighting a previously ignored channel for global transference of liquidity, with concomitant agency costs.",

keywords = "Chinese capital markets, Dividends, Financial crises, Financial liquidity, Foreign direct investment, Foreign equity ownership",

author = "Wei Huang and Goodell, \{John W.\} and Abhinav Goyal",

note = "Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

year = "2021",

month = jul,

doi = "10.1016/j.intfin.2021.101380",

language = "English",

volume = "73",

journal = "Journal of International Financial Markets, Institutions and Money",

issn = "1042-4431",

publisher = "Elsevier B.V.",

}

TY - JOUR

T1 - In times of crisis does ownership matter? liquidity extraction through dividends during the 2007–2009 financial crisis

AU - Huang, Wei

AU - Goodell, John W.

AU - Goyal, Abhinav

PY - 2021/7

Y1 - 2021/7

N2 - Liquidity flow between regions with different levels of temporary financial constraints has received insufficient attention. This study takes advantage of a natural opportunity: Chinese capital markets clearly distinguish between foreign direct investment firms and firms with foreign institutional investment. Using the distinctive categorization of institutional holding structures in China, we find that foreign controlled enterprises were associated with an extraordinary increase in dividend payouts during the Global Financial Crisis, with concomitant underinvestment. Our results suggest that foreign-controlling shareholders extracted liquidity through dividends, highlighting a previously ignored channel for global transference of liquidity, with concomitant agency costs.

AB - Liquidity flow between regions with different levels of temporary financial constraints has received insufficient attention. This study takes advantage of a natural opportunity: Chinese capital markets clearly distinguish between foreign direct investment firms and firms with foreign institutional investment. Using the distinctive categorization of institutional holding structures in China, we find that foreign controlled enterprises were associated with an extraordinary increase in dividend payouts during the Global Financial Crisis, with concomitant underinvestment. Our results suggest that foreign-controlling shareholders extracted liquidity through dividends, highlighting a previously ignored channel for global transference of liquidity, with concomitant agency costs.

KW - Chinese capital markets

KW - Dividends

KW - Financial crises

KW - Financial liquidity

KW - Foreign direct investment

KW - Foreign equity ownership

UR - https://www.scopus.com/pages/publications/85109431567

U2 - 10.1016/j.intfin.2021.101380

DO - 10.1016/j.intfin.2021.101380

M3 - Article

AN - SCOPUS:85109431567

SN - 1042-4431

VL - 73

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

M1 - 101380

ER -

In times of crisis does ownership matter? liquidity extraction through dividends during the 2007–2009 financial crisis

Abstract

UN SDGs

Free Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this