Influence of China's geopolitical risk on corporate dividend policies

Abstract

Using data from Shanghai and Shenzhen A-share listed companies from 2000 to 2020, this study examines the impact of China's geopolitical risk on corporate dividend policies and its underlying mechanisms. Findings indicate that China's geopolitical risk reduces firms’ willingness to pay stock and cash dividends; instead, they prefer repurchasing shares as a means of returning value to shareholders. Geopolitical risk increases financing costs and elevates systemic risks, influencing firms’ financial decisions and dividend policies. Heterogeneity analysis reveals that non-state-owned enterprises tend to have reduced willingness to pay stock and cash dividends. Meanwhile, state-owned enterprises are more inclined to increase share repurchases in response to geopolitical risks. Furthermore, younger firms are more susceptible to geopolitical risk shocks compared with mature firms and adjust their dividend policies accordingly. Moreover, firms with overseas affiliations are more likely to alter their dividend strategies in response to geopolitical risks compared to those without such connections.