Abstract: Based on the agent theory and the combination of law and finance theory, this paper studies the impact of the separation between the control rights of actual controllers and the cashflow rights on the cash dividend intention and level in family business. Furthermore, it tests the difference of the abovementioned impact under different institutional environments. The rsults indicate that the greater the separation degree of the two rights, the lower the willingness to pay cash dividend; the separation degree of the two rights is negatively correlated with cash dividend intension and level significantly. In addition, the impact of separation degree on the dividend policy is quite different under different institutional environments. The negative correlation is more significant when companies are under worse institutional environments, while better institutional environments can restrain the lower dividend tendency of the actual controllers. This suggests that, to a certain degree, better external institutional environment can be an important alternative mechanism to protect the interests of the medium and small investors.

Key words: institutional environment; separation of control rights and cash flow rights; cash dividend; agency theory