High-speed rail and dividend smoothing

Purpose This study enriches our comprehension of the broader consequences of high-speed rail expansion and offers empirical evidence to the ongoing discourse surrounding cash dividend smoothing. Design/methodology/approach This study investigates the impact of transportation infrastructure, specifically high-speed rail, on the smoothness of cash dividends within firms. It employs a quasi-natural experiment approach with the difference-in-difference method. Findings Results reveal a significant decrease in cash dividend smoothness following the introduction of high-speed railways in the city where the firm is registered. The influence of high-speed rail on cash dividend volatility is attributed to three primary channels: mitigating information asymmetry, reducing reliance on shareholder dividends, and easing financing constraints. Heterogeneity analysis indicates that the opening of high-speed rail is more likely to induce cash dividend volatility in companies with higher levels of institutional investor shareholdings and in more competitive markets. Research limitations/implications This study highlights varying impacts of cash dividend volatility on analyst forecast accuracy and individual stock turnover based on the firm’s dividend payout level. Practical implications This research contributes to new geographic economics and offers empirical insights into dividend smoothing research, as well as regulatory policies, such as those set forth by the CSRC (China Securities Regulatory Commission). Social implications The study provides valuable insights for management in crafting dividend policies. In instances where a company struggles to inspire investor confidence through high dividend payouts or maintain stability with low dividends, it may contemplate increasing dividend volatility to capture investor attention. Originality/value The study highlights that cash dividend volatility yields varied economic outcomes depending on the level of dividend payout ratios. Tailoring smoothing guidelines based on dividend levels could better align with investor interests and enhance the overall information environment. These insights offer novel perspectives on regulatory guidelines, such as those set forth by the CSRC, pertaining to dividend regulation.