Ultimate Control, Expropriation and Dividend Payments: A Reputation Management Perspective

General management is concerned with a firm's reputation, and a high expropriation risk can lead to an unfavourable reputation. The corporate reputation management perspective predicts that such firms could improve their reputation by adopting appropriate dividend policies. This study investigates the dividend policies of firms listed in Hong Kong over the 1997–2007 period. The results show that for firms with a higher expropriation risk proxied by high ultimate control and control divergence, dividend rates are negatively associated with control divergence and dividend payments are more stable, thus supporting the predictions of the reputation management perspective. This study further discusses the implications for researchers and practitioners in general management.