We analyse the influence of financial constraints on the peer effect of dividend decision in China by employing the Carhart fourfactor model to construct instrument variables of peer influence. We find that (1) the decision of whether to pay cash dividends (DIV) is significantly influenced by peers, and the estimated marginal effect is 0.53%, but the question of whether to pay catering dividends and the extent of such dividends to be paid are not significantly affected by peers. (2) Under the semimandatory dividend policy in China, financial constraints will significantly reduce peer influence on the dividend level. (3) Peer influence on DIV is more pronounced among companies that face high financial constraints.
Keywords
 dividend decision
 peer influence
 financial constraint
 conduction path
 Carhart fourfactor model
Cash dividend decision is one of the major financial management decisions of listed companies, but it is also influenced by China's regulatory policy. In order to protect the interests of investors and raise the dividend level of listed companies, the Securities Regulatory Commission has issued the policy that clearly states that the cumulative cash dividends (DIV) of the past 3 years should not be <20% of the average annual profits realised in the last 3 years if the companies want to issue new securities. This requirement is raised to 30% in 2008. Scholars name the policy as ‘semimandatory dividend policy” (Li et al., 2010) [1], which has a certain impact on the dividend behaviour of Chinese companies. On the one hand, it makes the companies who need to issue new securities to refinance, which will increase their willingness to pay dividends and readily comply with the policy. However, companies that do not have such needs will lack incentives (Wang and Zhang, 2012. Wei et al., 2014) [2, 3] and thus their willingness to pay dividends may even become weakened (Gao et al., 2018) [4]. According to the dividend data of listed companies in China from 2008 to 2019, the proportion of listed companies distributing DIV rose from 52.64% to 69.7%, but the average cash dividend payment rate raised only from 22.69% to 26.49%, and cash dividend payment rate of listed companies which paid DIV decreased from 43.10% to 38%. The studies comprising the existing literature do not answer the question of why the dividend willingness is improved but the dividend level has not significantly improved in China.
Some scholars have found that the company's dividend decision is influenced by the peer companies, resulting in the convergence of dividend behaviour. Adhikari and Agrawal (2018) [5] take the Americanlisted company as the sample and find that the company dividend policy is affected by peer companies in the same industry. The main reason is the competition imitation mechanism. Grennan (2019) [6] also empirically analyses the peer influence of dividend decision change. Ding and Li (2020), Li et al. (2020) and Wang et al. (2021) [7,8,9] studied the regional and industrial peer influence on the dividend payouts of listed companies in China, but none of the above studies take into account the reality of financial constraints faced by most enterprises in China and the influence of the semicompulsory dividend policy.
Therefore, considering the semimandatory dividend policy, this paper researches the influence of financial constraints on peer influence on cash dividend decision, and the conduction path of peer influence between enterprises with different financial constraints. The main contribution of this paper is (1) it enriches the research on the peer influence of dividend decision under the semicompulsory dividend policy in China, (2) it researches the influence of financial constraints on dividend decision peer influence; and (3) it studies the conduction path of peer influence on dividend decision between enterprises with varying financial constraints.
Peer influence arises from the imitation behaviour between enterprises. Lieberman and Asaba (2006) [10] put forward two theories on why enterprises imitate each other. One is the informationbased theory, where firms follow other companies that are perceived as having superior information. The other one is rivalrybased theories, where firms imitate others to maintain competitive parity or limit rivalry. The informationbased theory is related to the uncertainty of the external environment. If the company manager cannot accurately predict the results of a decision or an action, the company will very likely accept the information contained in the actions of other companies and imitate the decisionmaking actions of other peer companies. In fact, enterprises need to refer to a large number of internal and external information when making decisions. Moreover, because of the information asymmetry in the market, the cost of information acquisition is high, and even some external information is difficult to obtain. Companies in the same industry will imitate each other for the reasons that the macroenvironment, industry policy and supply chain environment are very similar, and the basic elements and external information needed for decisionmaking are the same. Therefore, imitation and learning from peers may be a lowcost and efficient information channel, which can reduce the cost of information acquisition and the risk of decisionmaking.
Another kind of imitative motivation based on information is herd behaviour. As any behaviour of the enterprise conveys certain information to the outside world, this information may be used by stakeholders, such as investors, as useful information to evaluate the enterprise. Business managers may ignore private information in order to improve or maintain a good brand reputation and imitate others’ behaviours to avoid negative evaluation. The dividend signal theory shows that the company pays dividends in order to transmit information to shareholders. The dividend principal–agent theory holds that dividend payment is beneficial to reduce the agent cost and reflects a good level of corporate governance. Therefore, companies may imitate peers in order to obtain a positive evaluation.
Another reason why peer individuals imitate each other is that competition produces imitation behaviour (Adhikari and Agrawal, 2018) [5]. When companies with comparable resource endowments and market positions compete with each other, companies can adopt differentiation strategies to distinguish them from competitors, and this reduces the possibility of imitation and may generate higher profits. However, any differentiation strategy often needs higher investment and is associated with higher risk, which could even lead to business failure. In contrast, homogenisation strategy can also limit the exertion of competitors’ competitive advantage by imitating them, so imitation can also reduce competition. There are generally ‘leaders’ and ‘followers’ with different competitive advantages in an industry. ‘Followers” often imitate the behaviours of ‘leaders’ in order to narrow the gap and reduce the intensity of competition. Dividend is an important factor of company information and company valuation. Regulators, thirdparty supervision and auditors may compare the target companies with the industry average level or the level of peer companies, so the target companies have competitive imitation motivation. Therefore, the company is likely to imitate the dividend decision behaviour of the peer companies. Therefore, we build up the hypothesis H1:
H1: Companies’ dividend decisions are positively influenced by peer companies.
Financial constraints refer to the difficulty in obtaining financing when there is a need for capital to invest, which often arises due to the frictions in the supply of capital. The chief source of friction is information asymmetries between investors and the firm (Tirole, 2006) [11], and because of that, the investment cannot reach the optimal level he condition (Fazzari et al., 1988) [12]. The difference of internal and external capital cost leads to the preference of internal capital, so companies prefer endogenous capital and adopt residual dividend policy. A lot of research suggests that the smaller the external financial constraints on companies, the higher the dividend level. China's capital market is still in rapid development and most companies are facing financial constraints, and so they do not pay dividend (Zhang and Wang, 2015) [13]. To protect the interests of investors, the Chinese government introduced a semimandatory dividend policy, which requires the companies that want to issue new securities to pay a certain percent of profits in the form of DIV. Hence, companies with refinancial needs are deliberately deployed to meet regulatory conditions (Wei et al, 2017) [14], leading to a policy pandering motive. Therefore, we build up the hypotheses H2 and H3:
H2: The greater the financial constraints, the more likely the company is to pay dividends.
H3: The greater the financial constraints, the lower the cash dividend level of the company.
When the enterprise's own profit cannot meet the investment demand, there is an external financial demand. At this time, it is difficult to obtain external financial support, unless the obligation is accepted to pay higher financial costs and put up with additional financial constraints. When enterprises face higher financial constraints, the payment of DIV will reduce the inner funds of enterprises; however, the external financial demand will be greater, which will lead to the reduction of financial flexibility and the loss of company value. When enterprises face higher financial constraints, they will put their own factors in a more important position, and at the same time, they will not be able to imitate their peers even if they want, which leads to weakening of the impact of peer companies. Therefore, we build up the hypothesis H4:
H4: The greater the financial constraints, the less the company's dividend decision is affected by the peer companies.
We use the data of China's stocklisted companies as the primary data from the China CSMAR database. The full sample runs from 2010 to 2019. Following previous studies (e.g. Leary and Roberts, 2014) [15], we exclude financial and ST companies, companies that have only one peer in 1 year or listed for <3 years. The final screening of 2589 listed companies results in a total of 18,337 samples. We winsorise all variables at the 0.5 and 99.5 percentile levels to minimise the influence of outliers.
In analysing the cash dividend decision of company i, we use three measures as decision of cash dividend. The first one is whether to pay a cash dividend (Div_dum). The second one is whether to pay the catering dividend (Div_cat). Following previous studies of Chen et al. (2015) [16], the ratio of total accumulated DIV in the last 3 years to the arithmetic average of distributable profits in the last 3 years is between 30% and 40%, i.e., Div_cat equals 1, otherwise equals 0. The third one is Div_lev, which is measured by the ratio of cash dividend per share to earnings per share.
The explanatory variable is peer influence dividend decisions. Peer firms are defined as all firms in the same firstlevel industry classification of China Securities Regulatory Commission (CSRC) as peer companies, except firm i, in a given year corresponding to dependent variables, measured by Peer_dum, Peer_cat and Peer_lev, respectively. Peer_dum refers to the proportion of companies that pay cash dividends among peers, Peer_cat refers to the proportion of companies that pay catering dividends among peers and Peer_lev refers to the average cash dividend level of the peers.
Because the interaction between companies in the same industry will produce endogenous problems, there are also identification challenges in empirical tests of peer influence. Similar to those used by Adhikari and Agrawal (2018) [5], we use two instrumental variables, which are peer average idiosyncratic equity shocks (Peer_ir) and peer idiosyncratic volatilities (Peer_risk). The calculation processes are as follows:
First, we use the Carhart fourfactor model to calculate the monthly idiosyncratic stock return of the company i. The models are as follows:
Carhart fourfactor model regression descriptive statistics.
214608  1.107  0.382  −13.088  4.887  
214608  0.811  1.214  −10.784  37.164  
214608  −0.446  1.133  −19.25  20.891  
214608  0.007  0.327  −4.943  8.215  
214608  0.006  0.054  −0.641  1.963  
214608  0.008  0.138  −0.69  4.049  

214608  0.013  0.104  −1.239  1.797 
214608  −0.004  0.119  −1.803  3.629 
Then, we sum 12 months Idiosyncratic Return of company i in year T as the annual Idiosyncratic Return. The average annual Idiosyncratic Return of peers in industry j in year T is the
Financial constraint is measured by the KZ index, which is the most popular measure of financial constraints (FarreMensa, 2016) [17]. KZ index is also widely used as a measure of financial constraints in China (Li and Huang, 2020) [18]. In order to fit the actual condition of China, we combine currency funds and transactional financial assets as cash holdings (CASH); net operating cash flows (OCF) and DIV are standardised according to total assets at the end of last year. The other two factors are the assets–liabilities ratio (LEV) and Tobin's Q. By using ordinal Logit regression, the regression coefficients were significant at 1% and pseudo
Following the existing literature, the control variables include enterprise size (Size), cash ratio (Cash), total return on assets (ROA), growth rate (Growth), Tobin's Q, asset–liability ratio (Lev), established life (Life), equity nature (Soe) and equity concentration (Shr1). The definition of variables is shown in Table 2.
Variable definitions.
Variable name  Symbol  Variable definitions 

Dividend decisions  Div_dum  Whether or not to pay DIV, pay DIV of 1, or 0 
Div_cat  Whether or not to pay catering dividend, pay catering dividend of 1, or 0  
Div_lev  Dividend level, the ratio of dividend per share to basic earnings per share  
Peer influence  Peer_dum  Share of companies in the industry with the exception of target companies 
Peer_cat  Share of companies with peers that pay dividends other than target companies  
Peer_lev  Average dividend level for peer companies other than target companies  
Peer average idiosyncratic equity shocks  Peer_ir  Average idiosyncratic return of peer companies calculated by Carhart fourfactor model 
Peer idiosyncratic volatilities  Peer_risk  The standard deviation of idiosyncratic return of peer companies calculated by Carhart fourfactor model 
Financial constraints  KZ  Calculated according to regression model of KZ index 
Company size  Size  Natural logarithm of total assets at the end of the period 
Cash ratio  Cash  Cash and cash equivalents balance/current liabilities at end of the period 
Growth rate  Growth  (Gross operating income for the year  gross operating income for the previous year)/Gross operating income for the previous year 
Growth  Tobin's Q  Market value/total end assets 
Return on total assets  ROA  Net profit/total average assets for the year 
Assetliability ratio  Lev  Total ending liabilities/total ending assets 
Established years  Life  Natural logarithm of the number of years of incorporation 
Equity nature  Soe  The nature of a stateowned enterprise is 1, or 0 
Equity concentration  Shr1  Share of the largest shareholder 
DIV, cash dividends; ROA, return on assets.
We use model (4) to test whether the company i's dividend decision is influenced by peers in China. To test the impact of financial constraints on company i's dividend decision and the peer influence of dividend decision, we add KZ index and interaction item of peer influence and KZ index to model (4) to form model (5). If the interaction item's coefficient is significantly negative, it means financial constraints will weaken the peer influence of dividend decision.
Table 3 is a descriptive statistic of the main variables. Descriptive statistics show that the average Div_dum is 0.74, the average Div_cat is 0.094 and the average Div_lev is 0.264, indicating that from 2010 to 2019, 74% of listed companies paid DIV, 9.4% of listed companies paid catering dividends and the average dividend per share of earnings per share is 26.4%.
Descriptive statistics of major variables.
Variable  Observations  Mean  Standard deviation  Minimum value  Median  Maximum value 

Div_dum  18337  0.740  0.439  0.000  1.000  1.000 
Div_cat  18337  0.094  0.292  0.000  0.000  1.000 
Div_lev  18337  0.264  0.316  0.000  0.198  1.962 
Peer_dum  18337  0.706  0.083  0.143  0.704  1.000 
Peer_cat  18337  0.090  0.038  0.000  0.087  1.000 
Peer_lev  18337  0.270  0.073  0.029  0.278  0.400 
KZ  18337  1.144  1.794  −4.526  1.332  4.867 
Size  18337  22.399  1.277  19.961  22.226  26.240 
Life  18337  2.871  0.285  2.079  2.890  3.526 
ROA  18337  0.036  0.056  −0.225  0.033  0.195 
Lev  18337  0.451  0.201  0.062  0.449  0.887 
Cash  18337  0.667  0.987  0.023  0.343  6.511 
Growth  18337  0.191  0.464  −0.520  0.108  3.146 
Tobin's Q  18337  1.995  1.306  0.000  1.591  8.135 
Soe  18337  0.443  0.497  0.000  0.000  1.000 
Shr1  18337  35.080  15.007  8.448  33.255  74.890 
Peer_ir  18337  −0.004  0.011  −0.055  −0.006  0.062 
Peer_risk  18337  1.397  1.380  0.001  1.624  4.962 
DIV, cash dividends; ROA, return on assets.
Peer influence on dividend decision.
Div_dum  Div_cat  Div_lev  

Peer_dum  2.191** (0.028)  
Peer_cat  4.225 (0.151)  
Peer_lev  0.290 (0.297)  
Control variables  yes  yes  yes 
Year/Industry  yes  yes  yes 
IV:  
Peer_dum  Peer_cat  Peer_lev  
Peer_risk  0.012*** (0.000)  0.002*** (0.000)  0.016*** (0.000) 
Peer_re  −1.343*** (0.000)  −0.564*** (0.000)  −1.048*** (0.000) 
Wald test  4.53**  3.34*  1.51 
N  18337  18331  18337 
Note: The values in parentheses are p values.
***, ** and * indicate significant at the levels of 1%, 5% and 10%, respectively.
DIV, cash dividends.
In order to test whether the peers influence listed companies’ dividend decision in China. The regression results show that controlling other related variables, the regression coefficient of Peer_dum is 2.191 and is significantly positive at the level of 5%, indicating that there exists peer influence. The result means that the higher the proportion of peer companies that pay DIV, the greater the possibility is for the company that will pay DIV. The estimated marginal effect of Peer_dum is 0.0053 when other variables are kept at their means, which suggests that compared to a company with nodividend–paying peers, a company with alldividend–paying peers is 0.53% more likely to pay dividends. The coefficients of Peer_cat and Peer_lev are positive but not significant, indicating that there is no significant peer influence on the level of DIV of listed companies in China. This conclusion is different from that of Adhikari and Agrawal (2018) and Grennan (2019), who take the western developed markets as the research background. The reason for this result in China may be mainly explained by the financial constraints. The capital market of China is an emerging market, and most enterprises face higher financial constraints, which limits their ability to imitate peers to issue higher dividend levels. Besides, the semimandatory dividend policy of China makes the enterprises adopt a strong policy catering motive and pay less attention to the dividend decision behaviour of the peers, which leads to a situation wherein the influence on a company from its peers is not obvious.
To test the impact of financial constraints on the peer influence on dividend decision of listed companies in China, we use model (5). The results are shown in Table 5.
Financial constraints, peer influence and dividend decision.
Div_dum  Div_cat  (3) Div_lev  

(1)  (2)  (3)  (4)  (5)  (6)  
Peer_dum  2.246** (0.025)  2.371** (0.023)  
Peer_cat  3.818 (0.204)  5.428* (0.080)  
Peer_lev  0.304 (0.275)  0.254 (0.354)  
Peer_dum*KZ  −0.002 (0.991)  
Peer_cat*KZ  −1.977*** (0.009)  
Peer_lev *KZ  −0.029 (0.417)  
KZ  0.120*** (0.000)  0.120 (0.444)  0.182*** (0.000)  0.378*** (0.000)  −0.008*** (0.001)  0.000 (0.965) 
Controls variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer_dum  Peer mk  Peer_lev  Peer_dum  Peer mk  Peer_lev  
Peer _risk  0.012*** (0.000)  0.013*** (0.000)  0.002*** (0.000)  0.002*** (0.000)  0.016*** (0.000)  0.015*** (0.000) 
Peer_ir  −1.341*** (0.000)  −1.485*** (0.000)  −0.563*** (0.000)  −0.661*** (0.000)  −1.046*** (0.000)  −0.872*** (0.000) 
Peer _risk*KZ  −0.000** (0.043)  −0.000*** (0.000)  0.000 (0.707)  
Peer_ir*KZ  0.102*** (0.000)  0.066*** (0.000)  −0.114*** (0.000)  
Wald test  5.07**  6.66**  2.98*  6.64**  1.61  1.02 
N  18337  18337  18331  18331  18337  18337 
Note: The values in parentheses are p values.
***, ** and * indicate significant at the levels of 1%, 5% and 10%, respectively.
DIV, cash dividends.
Columns (1), (3) and (5) in Table 5 show that the peer influence is still only significantly positive as respects the decision of whether or not to pay dividends. The coefficients of financial constraints are 0.120, 0.182 and −0.008; all are significant at the level of 1%, which shows that financial constraint has a positive effect on the decision of whether or not listed companies pay cash and whether to pay dividends.
Because peer influence is an endogenous variable, interaction item of peer influence and KZ index is also an endogenous variable. We construct the interaction variables of Peer_ir with KZ index and Peer_risk with KZ index as the instrumental variables of the interaction item. Columns (2), (4) and (6) in Table 5 add interaction items of peer influence and KZ index, which mainly focus on the relations of financial constraint and the peer influence of dividend decision. The coefficient of interaction item in Column (2) is −0.002, but not significant. It means that the higher the proportion of peers who pay DIV, the more likely a company is to pay DIV, no matter what level of financial constraints it is facing. The coefficient of interaction item in Column (4) is −1.1977 and is significant at 1%, which indicates that the higher the proportion of peer companies that pay catering dividends, the less likely the enterprise is to pay catering dividends if the financial constraints are higher. This is because the higher the proportion of companies that pay dividends among their peers, the greater the competition is in the capital market and the higher the refinancial costs. So the company that needs to refinance will tend to raise funds from banks; as a result, the peer influence is weakened. The coefficient of interaction item in Column (4) is −0.029, which shows that the financial constraints in China not only limit the ability to improve the level of DIV but also limit the ability to imitate peer companies to pay higher DIV. It is an important reason why peer influence is not significant.
In this paper, the robustness test is carried out in the following ways and the conclusions are robust.
In order to reduce the impact of bonus share on cash dividend issuance decisions, we exclude the sample that gives bonus share, and the regression results show that the decision of whether to pay DIV is positively affected by peers. However, there is still no significant peer influence on whether to pay catering dividends and dividend level, as shown in Columns (1), (2) and (3) of Table 6.
Robustness test of 4.4.1 and 4.4.2.
Excluding samples that pay Bonus Shares  Add industry risk as a control variable  

Div_dum (1)  Div_cat (2)  Div_lev (3)  Div_dum (4)  Div_cat (5)  Div_lev (6)  
Peer_dum  2.215** (0.023)  2.150** (0.026)  
Peer_cat  4.448 (0.134)  4.116 (0.176)  
Peer_lev  0.299 (0.299)  0.322 (0.246)  
Ind_risk  −0.431 (0.687)  −0.685 (0.654)  0.200 (0.474)  
Control variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.012*** (0.000)  0.002*** (0.000)  0.016*** (0.000)  0.013*** (0.000)  0.001** (0.029)  0.016*** (0.000) 
Peer_ir  −1.395*** (0.000)  −0.569*** (0.000)  −1.050*** (0.000)  −1.365*** (0.000)  −0.542*** (0.000)  −1.056*** (0.000) 
Wald test  5.14**  3.63*  1.41  4.62**  3.16*  1.92 
N  17831  17825  17831  18337  18331  18337 
Note: The values in parentheses are p values.
***, ** and * indicate significant at the levels of 1%, 5% and 10%, respectively.
DIV, cash dividends.
Firms may use similar dividend policies simultaneously in response to common industry shocks. To solve the endogenous problem of possible missing variables, we add industry risk (Ind_risk) as a control variable. We use the standard deviation of the difference between monthly industry return and monthly market return as industry risk. The regression results are shown in Columns (4), (5) and (6) of Table 6.
SA index is also widely used by scholars to measure financial constraints. We replace the KZ index in model (5) with the SA index. The regression results show that the peer influence is only significantly positive as regards the decision of whether to pay DIV, and is not significant as regards the decision of whether to pay catering dividends and the extent of payment that can be made; and the coefficient of interaction item is consistent with the previous part (Table 7).
Robustness test of 4.4.3.
Div_dum  Div_cat  Div_lev  

(1)  (2)  (3)  (4)  (5)  (6)  
Peer_dum  2.170** (0.029)  9.337 (0.430)  
Peer_cat  4.335 (0.141)  −62.262*** (0.000)  
Peer_lev  0.285 (0.305)  −1.052 (0.387)  
Peer_dum*SA  1.763 (0.551)  
Peer_cat*SA  −17.143*** (0.000)  
Peer_lev *SA  −0.352 (0.245)  
SA  −0.857*** (0.000)  −2.126 (0.318)  −1.165*** (0.000)  0.516 (0.244)  −0.080*** (0.009)  0.011 (0.895) 
Control variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.012*** (0.000)  −0.008 (0.119)  0.002*** (0.000)  −0.004 (0.111)  0.016*** (0.000)  −0.001 (0.902) 
Peer_ir  −1.343*** (0.000)  0.755 (0.349)  −0.564*** (0.000)  −1.261*** (0.003)  −1.048*** (0.000)  3.025*** (0.000) 
Peer _risk*SA  −0.005*** (0.000)  −0.001** (0.017)  −0.004*** (0.000)  
Peer_ir*SA  0.544*** (0.008)  −0.180* (0.093)  1.054*** (0.000)  
Wald inspection  4.59**  5.58*  3.44*  14.6***  1.47  2.05 
Sample size  18337  18337  18331  18331  18337  18337 
Note: The values in parentheses are p values.
***, ** and * indicate significant at the levels of 1%, 5% and 10%, respectively.
DIV, cash dividends.
The studies by Adhikari and Agrawal (2018) [5] have found that cash dividend decisions of smallscale companies are influenced by both smallscale peers and largescale peers, while largescale companies are only affected by largescale peers, which means peers influence is asymmetric. From the perspective of financial constraints, we study the transmission path between different financial constraint companies.
We define a company whose KZ index is higher than the average KZ index in industry j in year T as a high financial constraint company. Otherwise, it is a low financial constraint company. There are 8186 samples in the low financial constraint group, as against 10,151 samples in the high financial constraint group, reflecting that most companies in China are facing high financial constraints.
The peer influence of low financial constraint and that of high financial constraint are calculated according to different financial constraint levels. Model (5) is used to analyse whether the company is influenced by peers with the same financial constraints level or with different financial constraints levels. Then the path of peer influence conduction is analysed.
The results in Table 8 show that, for low financial constrained enterprises, the coefficient of low financial constrained peer influence is 1.824 and that of high financial constrained peer influence is 2.142, but they are not significant. For high financial constrained companies, the coefficient of low financial constrained peer influence is 2.478 and that of high financial peer influence is 2.868; all are significant at the level of 10%, indicating that enterprises facing higher financial constraints are more likely to imitate peers, regardless of the financial constraints of peer companies. In other words, there are two paths to conduct the peer influence of the decision on whether to pay cash dividends: one is that the low financial constraint enterprise transmits to the high financial constraint enterprise and the other is that the high financial constraint enterprise transmits to the high financial constraint enterprise.
Peer influence conduction path in different financial constrained companies.
Div_dum  

Low financial  constraints  High financial  constraints  
Low Financial Constraint Group 
1.824 (0.167)  2.478* (0.060)  
High Financial Constraint Group 
2.142 (0.176)  2.868* (0.063)  
Control variables  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.017*** (0.000)  0.006*** (0.000)  0.007*** (0.000)  0.019*** (0.000) 
Peer_ir  −2.046*** (0.000)  −1.757*** (0.000)  −1.611*** (0.000)  −2.068*** (0.000) 
Wald Inspection  1.17  1.04  4.72**  3.11* 
Sample size  8184  8186  10151  10151 
Note: The values in parentheses are p values.
***, ** and * indicate significant at the levels of 1%, 5% and 10%, respectively.
DIV, cash dividends.
Based on the sample of stocklisted companies from 2010 to China, this paper analyses the peer influence on cash dividend policy and the influence of financial constraints on dividend decision peer influence. It is found that (1) the decision of whether to pay DIV is significantly influenced by peers, but the decision of whether to pay catering dividends and the extent of dividend that can be paid are not significantly affected by peers. (2) Under the semimandatory dividend policy in China, financial constraints will significantly increase the willingness of companies to pay DIV, but will significantly reduce the dividend level and make the peer influence on the dividend level not significant. (3) Peer influence on DIV decision is more pronounced among companies that face high financial constraints, meaning that the peer influence is mainly conducted from low financial constrained companies and high financial constrained companies to high financial constrained companies.
Carhart fourfactor model regression descriptive statistics.
214608  1.107  0.382  −13.088  4.887  
214608  0.811  1.214  −10.784  37.164  
214608  −0.446  1.133  −19.25  20.891  
214608  0.007  0.327  −4.943  8.215  
214608  0.006  0.054  −0.641  1.963  
214608  0.008  0.138  −0.69  4.049  

214608  0.013  0.104  −1.239  1.797 
214608  −0.004  0.119  −1.803  3.629 
Variable definitions.
Variable name  Symbol  Variable definitions 

Dividend decisions  Div_dum  Whether or not to pay DIV, pay DIV of 1, or 0 
Div_cat  Whether or not to pay catering dividend, pay catering dividend of 1, or 0  
Div_lev  Dividend level, the ratio of dividend per share to basic earnings per share  
Peer influence  Peer_dum  Share of companies in the industry with the exception of target companies 
Peer_cat  Share of companies with peers that pay dividends other than target companies  
Peer_lev  Average dividend level for peer companies other than target companies  
Peer average idiosyncratic equity shocks  Peer_ir  Average idiosyncratic return of peer companies calculated by Carhart fourfactor model 
Peer idiosyncratic volatilities  Peer_risk  The standard deviation of idiosyncratic return of peer companies calculated by Carhart fourfactor model 
Financial constraints  KZ  Calculated according to regression model of KZ index 
Company size  Size  Natural logarithm of total assets at the end of the period 
Cash ratio  Cash  Cash and cash equivalents balance/current liabilities at end of the period 
Growth rate  Growth  (Gross operating income for the year  gross operating income for the previous year)/Gross operating income for the previous year 
Growth  Tobin's Q  Market value/total end assets 
Return on total assets  ROA  Net profit/total average assets for the year 
Assetliability ratio  Lev  Total ending liabilities/total ending assets 
Established years  Life  Natural logarithm of the number of years of incorporation 
Equity nature  Soe  The nature of a stateowned enterprise is 1, or 0 
Equity concentration  Shr1  Share of the largest shareholder 
Descriptive statistics of major variables.
Variable  Observations  Mean  Standard deviation  Minimum value  Median  Maximum value 

Div_dum  18337  0.740  0.439  0.000  1.000  1.000 
Div_cat  18337  0.094  0.292  0.000  0.000  1.000 
Div_lev  18337  0.264  0.316  0.000  0.198  1.962 
Peer_dum  18337  0.706  0.083  0.143  0.704  1.000 
Peer_cat  18337  0.090  0.038  0.000  0.087  1.000 
Peer_lev  18337  0.270  0.073  0.029  0.278  0.400 
KZ  18337  1.144  1.794  −4.526  1.332  4.867 
Size  18337  22.399  1.277  19.961  22.226  26.240 
Life  18337  2.871  0.285  2.079  2.890  3.526 
ROA  18337  0.036  0.056  −0.225  0.033  0.195 
Lev  18337  0.451  0.201  0.062  0.449  0.887 
Cash  18337  0.667  0.987  0.023  0.343  6.511 
Growth  18337  0.191  0.464  −0.520  0.108  3.146 
Tobin's Q  18337  1.995  1.306  0.000  1.591  8.135 
Soe  18337  0.443  0.497  0.000  0.000  1.000 
Shr1  18337  35.080  15.007  8.448  33.255  74.890 
Peer_ir  18337  −0.004  0.011  −0.055  −0.006  0.062 
Peer_risk  18337  1.397  1.380  0.001  1.624  4.962 
Peer influence on dividend decision.
Div_dum  Div_cat  Div_lev  

Peer_dum  2.191 

Peer_cat  4.225 (0.151)  
Peer_lev  0.290 (0.297)  
Control variables  yes  yes  yes 
Year/Industry  yes  yes  yes 
IV:  
Peer_dum  Peer_cat  Peer_lev  
Peer_risk  0.012 
0.002 
0.016 
Peer_re  −1.343 
−0.564 
−1.048 
Wald test  4.53 
3.34 
1.51 
N  18337  18331  18337 
Robustness test of 4.4.1 and 4.4.2.
Excluding samples that pay Bonus Shares  Add industry risk as a control variable  

Div_dum (1)  Div_cat (2)  Div_lev (3)  Div_dum (4)  Div_cat (5)  Div_lev (6)  
Peer_dum  2.215 
2.150 

Peer_cat  4.448 (0.134)  4.116 (0.176)  
Peer_lev  0.299 (0.299)  0.322 (0.246)  
Ind_risk  −0.431 (0.687)  −0.685 (0.654)  0.200 (0.474)  
Control variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.012 
0.002 
0.016 
0.013 
0.001 
0.016 
Peer_ir  −1.395 
−0.569 
−1.050 
−1.365 
−0.542 
−1.056 
Wald test  5.14 
3.63 
1.41  4.62 
3.16 
1.92 
N  17831  17825  17831  18337  18331  18337 
Peer influence conduction path in different financial constrained companies.
Div_dum  

Low financial  constraints  High financial  constraints  
Low Financial Constraint Group 
1.824 (0.167)  2.478 

High Financial Constraint Group 
2.142 (0.176)  2.868 

Control variables  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.017 
0.006 
0.007 
0.019 
Peer_ir  −2.046 
−1.757 
−1.611 
−2.068 
Wald Inspection  1.17  1.04  4.72 
3.11 
Sample size  8184  8186  10151  10151 
Robustness test of 4.4.3.
Div_dum  Div_cat  Div_lev  

(1)  (2)  (3)  (4)  (5)  (6)  
Peer_dum  2.170 
9.337 (0.430)  
Peer_cat  4.335 (0.141)  −62.262 

Peer_lev  0.285 (0.305)  −1.052 (0.387)  
Peer_dum 
1.763 (0.551)  
Peer_cat 
−17.143 

Peer_lev 
−0.352 (0.245)  
SA  −0.857 
−2.126 (0.318)  −1.165 
0.516 (0.244)  −0.080 
0.011 (0.895) 
Control variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer _risk  0.012 
−0.008 (0.119)  0.002 
−0.004 (0.111)  0.016 
−0.001 (0.902) 
Peer_ir  −1.343 
0.755 (0.349)  −0.564 
−1.261 
−1.048 
3.025 
Peer _risk 
−0.005 
−0.001 
−0.004 

Peer_ir 
0.544 
−0.180 
1.054 

Wald inspection  4.59 
5.58 
3.44 
14.6 
1.47  2.05 
Sample size  18337  18337  18331  18331  18337  18337 
Financial constraints, peer influence and dividend decision.
Div_dum  Div_cat  (3) Div_lev  

(1)  (2)  (3)  (4)  (5)  (6)  
Peer_dum  2.246 
2.371 

Peer_cat  3.818 (0.204)  5.428 

Peer_lev  0.304 (0.275)  0.254 (0.354)  
Peer_dum 
−0.002 (0.991)  
Peer_cat 
−1.977 

Peer_lev 
−0.029 (0.417)  
KZ  0.120 
0.120 (0.444)  0.182 
0.378 
−0.008 
0.000 (0.965) 
Controls variables  Yes  Yes  Yes  Yes  Yes  Yes 
Year/Industry  Yes  Yes  Yes  Yes  Yes  Yes 
IV:  
Peer_dum  Peer mk  Peer_lev  Peer_dum  Peer mk  Peer_lev  
Peer _risk  0.012 
0.013 
0.002 
0.002 
0.016 
0.015 
Peer_ir  −1.341 
−1.485 
−0.563 
−0.661 
−1.046 
−0.872 
Peer _risk 
−0.000 
−0.000 
0.000 (0.707)  
Peer_ir 
0.102 
0.066 
−0.114 

Wald test  5.07 
6.66 
2.98 
6.64 
1.61  1.02 
N  18337  18337  18331  18331  18337  18337 
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