Keywords
stock price crash risk
information asymmetry
inefficient investment
manufacturing enterprises
How to Cite
Abstract
Purpose – Against China’s semi-mandatory dividend policy and integer dividend clustering, this study examines how deliberate integer cash dividends affect stock price crash risk of Chinese manufacturing firms and identifies its transmission mechanisms, addressing the gap on economic consequences of irrational dividend decisions.
Theoretical framework – Grounded in salient number theory, dividend catering theory, signaling theory and information asymmetry theory, it constructs a dual-path logical framework linking irrational integer dividend behavior to elevated crash risk from information environment and investment efficiency dimensions.
Design/methodology/approach – Using 12,476 firm-year observations of Chinese listed manufacturing firms from 2014 to 2024, this paper adopts fixed-effect and mediation models, with robustness checks via sensitivity analysis, high-dimensional fixed effects and Bootstrap sampling.
Findings – Deliberate integer cash dividends significantly raise manufacturing firms’ crash risk. This irrational dividend policy pushes up crash risk through two partial mediating paths: exacerbating information asymmetry between firms and external investors, and distorting capital allocation leading to inefficient investment. The effect is stronger for eastern-region firms, firms without bank-enterprise ties and non-SOEs.
Research Practical & Social implications – Theoretically, it expands literature on dividend policy outcomes and crash risk drivers. Practically, it provides immediate decision-making reference for manufacturing firms to optimize dividend formulation, avoid prevent extreme downside risks. It also offers empirical basis for regulators to improve dividend disclosure rules, rectify dividend distortions, and guide rational dividend distribution, stabilizing markets and supporting high-quality real economy growth.
Originality/value – Beyond traditional focus on dividend payout ratio clustering, this study systematically investigates the overlooked integer clustering in absolute cash dividends in China’s market and verifies dual mediating mechanisms, filling research gaps on risk effects of corporate irrational dividend decisions.
References
Adhikari, K. B., & Agrawal, A. (2018). Peer influence on payout policies. Journal of Corporate Finance, 48, 615-637. https://doi.org/10.1016/j.jcorpfin.2017.12.010
Albers, W., & Albers, G. (1983). On the prominence structure of the decimal system. Advances in Psychology, 16, 271-287. https://doi.org/10.1016/S0166-4115(08)62203-7
Baker, H. K., de Rooij, M., & Renneboog, L. (2009). The catering theory of dividends. In H. K. Baker (Ed.), Dividends and dividend policy. John Wiley & Sons. https://doi.org/10.1002/9781118258408.ch13
Banerjee, A. V. (1992). A simple model of herd behavior. The Quarterly Journal of Economics, 107(3), 797-817. https://doi.org/10.2307/2118364
Barron, O. E., Kim, O., Lim, S. C., & Stevens, D. E. (1998). Using analysts' forecasts to measure properties of analysts' information environment. The Accounting Review, 73(4), 421-433. https://doi.org/10.2308/TAR-1325287
Brav, A., Graham, J. R., Harvey, C. R., & Michaely, R. (2005). Payout policy in the 21st century. Journal of Financial Economics, 77(3), 483-527. https://doi.org/10.1016/j.jfineco.2004.07.004
Cinelli, C., Ferwerda, J., & Hazlett, C. (2024). Sensemakr: Sensitivity analysis tools for OLS in R and Stata. Observational Studies, 10(2), 93-127. https://doi.org/10.1353/obs.2024.a946583
Converse, B. A., & Dennis, P. J. (2018). The role of “prominent numbers” in open numerical judgment: Strained decision makers choose from a limited set of accessible numbers. Organizational Behavior and Human Decision Processes, 147, 94-107. https://doi.org/10.1016/j.obhdp.2018.05.007
Dennis, P. J., & Weston, J. P. (2025). Lazy dividends. Journal of Corporate Finance, 95, 102858. https://doi.org/10.1016/j.jcorpfin.2025.102858
Deshmukh, S., Goel, A. M., & Howe, K. M. (2013). CEO overconfidence and dividend policy. Journal of Financial Intermediation, 22(3), 440-463. https://doi.org/10.1016/j.jfi.2013.02.003
Ding, Z., & Li, B. (2020). Regional peer effect of dividend policy of listed companies. Journal of South China Normal University (Social Science Edition), (3), 95-107. (in Chinese) https://link.cnki.net/urlid/44.1139.C.20200513.1812.028
Duong, H. K., Ngo, A. D., & McGowan, C. B. (2015). Industry peer effect and the maturity structure of corporate debt. Managerial Finance, 41(7), 714-733. https://doi.org/10.1108/MF-02-2014-0050
Eliwa, Y., Haslam, J., & Abraham, S. (2021). Earnings quality and analysts’ information environment: Evidence from the EU market. Journal of International Accounting, Auditing and Taxation, 42, 100373. https://doi.org/10.1016/j.intaccaudtax.2020.100373
Farre-Mensa, J., Michaely, R., & Schmalz, M. (2014). Payout policy. Annual Review of Financial Economics, 6, 75-134. https://doi.org/10.1146/annurev-financial-110613-034259
Grennan, J. (2019). Dividend payments as a response to peer influence. Journal of Financial Economics, 131(3), 549-570. https://doi.org/10.1016/j.jfineco.2018.01.012
Hirshleifer, D., & Teoh, S. T. (2003). Herd behaviour and cascading in capital markets: A review and synthesis. European Financial Management, 9(1), 25-66. https://doi.org/10.1111/1468-036X.00207
Hou, D., Yuan, Z., Taran-Bozbay, A., et al. (2025). Dividend policies and managerial ability beyond financial constraints: Insights from China. Humanities and Social Sciences Communications, 12, Article 87. https://doi.org/10.1057/s41599-024-04131-w
Hu, X., & Lv, R. (2013). Executives overconfidence, over-pessimism and dividend herd behavior. Journal of Business Economics, (7), 28-36. (in Chinese) https://doi.org/10.14134/j.cnki.cn33-1336/f.2013.07.004
Huang, L., & Zhao, Z. (2019). Background of senior executives, dividend herding behavior and company value. Journal of Fuzhou University (Philosophy & Social Sciences), 33(2), 45-53. (in Chinese) https://fzds.cbpt.cnki.net/portal/journal/portal/client/paper/b029c6ac77c99bf6a96ea5fdaf9a3f79
Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports, R², and crash risk. Journal of Financial Economics, 94(1), 67-86. https://doi.org/10.1016/j.jfineco.2008.10.003
Jakob, K., & Nam, Y. (2019). Heaping on dividends: The role of dividend size and information uncertainty. Journal of Behavioral Finance, 21(1), 14-26. https://doi.org/10.1080/15427560.2018.1557391
Kim, J. B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639-662. https://doi.org/10.1016/j.jfineco.2010.07.007
Knotek, E. S. (2008). Convenient prices, currency, and nominal rigidity: Theory with evidence from newspaper prices. Journal of Monetary Economics, 55(7), 1303-1316. https://doi.org/10.1016/j.jmoneco.2008.07.009
Kumar, A., Lei, Z., & Zhang, C. (2022). Dividend sentiment, catering incentives, and return predictability. Journal of Corporate Finance, 72, 102128. https://doi.org/10.1016/j.jcorpfin.2021.102128
Leary, M. T., & Roberts, M. R. (2014). Do peer firms affect corporate financial policy? The Journal of Finance, 69(1), 139-178. https://doi.org/10.1111/jofi.12094
Li, X., & Liu, Y. (2024). Investor attention allocation and stock price synchronicity: Evidence from China. Systems Engineering Theory & Practice, 44(12), 3862-3876. https://doi.org/10.12011/SETP2024-1010
Luo, Q., Wu, X., & Yu, T. (2023). Dividend sentiment, dividend catering and stock price crash risk: Evidence based on search volume of Baidu Index platform. Journal of Management Sciences in China, 26(2), 87-103. (in Chinese) https://doi.org/10.19920/j.cnki.jmsc.2023.02.006
Manski, C. F. (1993). Identification of endogenous social effects: The reflection problem. The Review of Economic Studies, 60(3), 531-542. https://doi.org/10.2307/2298123
Miller, M. H., & Rock, K. (1985). Dividend policy under asymmetric information. The Journal of Finance, 40(4), 1031-1051. https://doi.org/10.1111/j.1540-6261.1985.tb02362.x
Qin, W., Liang, Q., Jiao, Y., Lu, M., & Shan, Y. (2022). Social trust and dividend payouts: Evidence from China. Pacific-Basin Finance Journal, 72, 101726. https://doi.org/10.1016/j.pacfin.2022.101726
Shefrin, H., & Statman, M. (1994). Behavioral capital asset pricing theory. Journal of Financial and Quantitative Analysis, 29(3), 323-349. https://doi.org/10.2307/2331334
Tao, Q., Nan, R., & Li, H. (2016). Information content of unexpected dividends under a semi-mandatory dividend policy: An empirical study of China. The North American Journal of Economics and Finance, 37, 297-318. https://doi.org/10.1016/j.najef.2016.05.001
Wong, T. J. (2016). Corporate Governance Research on Listed Firms in China: Institutions, Governance and Accountability. Foundations and Trends® in Accounting, 9(3-4), 259-326. https://doi.org/10.1561/1400000039
Yu, X., Wang, Y., Chen, Y., & Wang, G. (2021). Dividend payouts and catering to demands: Evidence from a dividend tax reform. International Review of Financial Analysis, 77, 101841.https://doi.org/10.1016/j.irfa.2021.101841
If a paper is approved for publication, its copyright has to be transferred by the author(s) to the Review of Business Management – RBGN.
Accordingly, authors are REQUIRED to send RBGN a duly completed and signed Copyright Transfer Form. Please refer to the following template: [Copyright Transfer]
The conditions set out by the Copyright Transfer Form state that the Review of Business Management – RBGN owns, free of charge and permanently, the copyright of the papers it publishes. Although the authors are required to sign the Copyright Transfer Form, RBGN allows authors to hold and use their own copyright without restrictions.
The texts published by RBGN are the sole responsibility of their authors.
The review has adopted the CC-BY Creative Commons Attribution 4.0 allowing redistribution and reuse of papers on condition that the authorship is properly credited.