Shareholder structure, managerial expectations, and dividend payout decisions: Evidence from China

Earnings, budget needs, and investment plans can shape dividend payout policy, but managers' expectations about the future also play a role in this decision. This study shows that a firm's operating status and changes in its shareholder structure, not earnings alone, shape managers' attitudes and expectations and, in turn, affect dividend payout decisions. We find that managers increase payouts when the shareholder base becomes more diversified and decrease payouts as the number of institutional shareholders grows. Individual investors tend to prefer dividends and may sell shares when payouts fall short, putting downward pressure on the share price. When small and individual investors hold a larger share of ownership, managers tend to prioritize shareholder wealth by meeting dividend targets. When a firm's operating outlook is optimistic, managers hold higher expectations for future performance, and dividend payouts increase. These findings contribute to management practice as well as agency theory and managerial delegation theory, and they offer guidance for decision making in corporate governance regulation and practice.