Research On Dividend Of State-owned Enterprises’ And Sustainable Growth From The View Of Free Cash Flow

State-owned enterprise (SOE) has been an important pillar of China’s national economy for a long time. As an investor of state-owned enterprises as well as an equal investment subject, the government has the right to enjoy the dividends of state-owned enterprises, but the situation where Chinese state-owned enterprises have turned over no profits or lower profits for a long time not only encourages the enterprise behaviors of in-office consumption and over-investment, but also maintains and strengthens the monopoly of state-owned enterprises, resulting in huge net losses of social welfare. The research results about the agency cost control of free cash flow in academia provide guidance for us to control the agency cost of free cash flow in state-owned enterprises. This dissertation will study the dividend distribution of state-owned enterprises around free cash flow, and investigate whether SOE dividends can inhibit the agency cost through the control of free cash flow in state-owned enterprises in order to promote the sustainable growth of enterprises and enhance the enterprise value. To solve this problem is of important theoretical and practical significance to promoting SOE Dividend Policy, improving the corporate governance structure, and increasing the efficiency of enterprises.Firstly, this dissertation makes a systematic description of the relevant theoretical basis for SOE dividends, free cash flow and sustainable growth; secondly, based on Dividend Agent Theory and Free Cash Flow Theory, it makes an in-depth exploration on whether SOE dividends as a means of dividend payment can produce an inhibitory effect on the agency cost caused by free cash flow, and then based on a mean regression analysis, uses the methods of quantile analysis and conditional density forecasting to test the relations among SOE dividends, free cash flow and agency cost under different corporate governance models; next, combined with the sustainable growth model proposed by Robert Higgins, this dissertation makes an in-depth study of the influence of SOE dividends on the sustainable growth of enterprises, and makes use of the autoregressive model of panel structure to delve into the relations among SOE dividends, free cash flow and sustainable growth; finally, a summary and prospect is made for this dissertation.The main work and research conclusions in this dissertation are listed as follows:Firstly, this dissertation studies the inhibitory effect of SOE dividends on the agency problems (in-office consumption and over-investment) of state-owned enterprises from the perspective of controlling the free cash flow of state-owned enterprises. Due to. the special and multilayer principal-agent relation of Chinese state-owned enterprises, state-owned enterprises have an expensive agency cost. In this dissertation, it is a research focus on investigating the inhibitory effect of SOE dividends on the agency problems of state-owned enterprises from the perspective of controlling the free cash flow of enterprises, thus providing theoretical and empirical support for SOE Dividend Policy. The research results indicate that the phenomena of in-office consumption and over-investment are prevalent in state-owned enterprises, and as opposed to private enterprises, state-owned enterprises have a lower dividend payment ratio. Free cash flow has an obvious positive influence on in-office consumption and over-investment in enterprises, and meanwhile, with the increase of free cash flow, the locations of both in-office consumption and over-investment in enterprises in the conditional density curve show a right-shift tendency. Cash dividend distribution interferes with the influence of free cash flow on in-office consumption and over-investment in enterprises, exerting an inhibitory effect on the problems of in-office consumption and over-investment in enterprises caused by excessive free cash flow. Enterprise scale plays a significant role in promoting in-office consumption and over-investment in enterprises. The financial leverage of enterprises will produce an inhibitory effect on in-office consumption and over-investment, but if the financial leverage, in-office consumption and over-investment of enterprises are all at a relatively high level, financial leverage will not achieve an inhibitory effect on in-office consumption and over-investment. Therefore, this dissertation holds that increasing the proportion of dividend distribution will help improve the efficiency of capital use, which is a focus on the reform of state-owned enterprises at this stage.Secondly, this dissertation incorporates the corporate governance mechanism into the research framework to investigate the inhibitory effect of SOE dividends on the agency problems (in-office consumption and over-investment) of enterprises from the perspective of perfecting the corporate governance mechanism. Compared with private enterprises, the governance issue of Chinese state-owned enterprises is more complicated and their agency problems are more serious, and meanwhile, Mandatory Dividend Policy is equivalent to exerting a layer of influence on the agency problems of state-owned enterprises. For this reason, this dissertation introduces the variables of corporate governance mechanism to investigate whether the perfection of corporate governance mechanism can promote the effective implementation of SOE Dividend Policy. It makes a broad investigation of various influence factors related to corporate governance, and combined with the characteristics of Chinese state-owned enterprises, introduces the relevant variables of two aspects including supervision mechanism and incentive mechanism of enterprises. The research results indicate that with the increase of enterprise supervision and incentive intensity, cash dividend distribution becomes more standard so that the interference of cash dividend payment gets strengthened, and its inhibitory effect is significantly enhanced on in-office consumption and over-investment of managers caused by excessive free cash flow. Thus, this dissertation argues that perfecting the corporate governance mechanism can strengthen the inhibitory effect of SOE Dividend Policy on in-office consumption and over-investment in enterprises caused by free cash flow.Thirdly, combined with the sustainable growth model proposed by Robert Higgins, this dissertation incorporates SOE dividends, free cash flow and sustainable growth into the same framework to conduct a research. Enterprises must take into account their sustainable growth ability in the development of dividend distribution policy. The more cash dividends are paid by enterprises, the fewer funds will be retained for enterprise development, which may slow down the sustainable growth rate of enterprises. However, more retained funds may not only lead to the blind investment and excessive waste of enterprises, but also be bad for the sustainable growth of enterprises. Thus, this dissertation makes an in-depth study of the internal relations among SOE dividends, free cash flow and sustainable growth. The research results indicate that sufficient free cash flow retained by enterprises is conducive to the sustainable growth of enterprises in the short term, but excessive free cash flow is not conducive to the sustainable growth of enterprises in the long term; cash dividend payment can effectively reduce the free cash flow of enterprises, which will produce a certain inhibitory effect on the sustainable growth of enterprises in the short term, but will promote the sustainable growth of enterprises in the long term; cash dividend payment can enhance the enterprise value, but this effect only lasts for a short period of time; cash dividend payment has a more obviously positive influence on enhancing the value of enterprises in sustainable growth. As a result, a perspective of ensuring the sustainable growth of state-owned enterprises should be adopted in the development of dividend policy to develop different dividend policies according to different sustainable growth rates of enterprises, and combine fixed proportion with variable proportion to establish a sustainable dividend proportion which should be positively correlated with enterprise sustainable growth rate and enterprise value.