Opening the black box: Business distribution in a group enterprise and Cash dividends

Existing literature on factors influencing cash dividends has regarded the listed companies and their subsidiaries as a whole research object, and no studies so far has opened the black box of the lower level internal capital market. We present an interesting evidence that the business distribution in a group enterprise, specially, the business distribution between the listed company and its subsidiaries, and the diversification of subsidiaries, has a significant impact on cash dividends. Firstly, the more business distributed in the subsidiaries, the less cash dividends the listed company could pay. Secondly, for the group enterprise in which subsidiaries are the main business runner, the diversification of subsidiaries has a further negative effect on cash dividends of listed company. This paper shed a new light on how business distribution and internal governance in a group enterprise affect cash dividends of listed company.