Research On Dividend Policy Of The Listed Company In China

Based on the assumption of perfect and complete capital market, Miller & Modigliani (1961) argue that dividend is irrelevant to corporate value. From then on, scholars develop many theories to explain the dividend policy. However, there have no agreements yet.Firm's net earnings are consists of retained earnings and dividend. Retained earnings are sources of internal financing. Therefore, dividend policy is closely related to company's finance decision. So this paper studies the behavior of payout from the aspect of financing.Firstly, for the existence of asymmetric information and transaction costs, the actual capital market is not perfect. External financing cost is much higher than the internal financing cost obviously, i.e.. company suffers from financial constraint. Secondly, the policies issued by the Securities Regulatory Commission directly link corporate's qualifications for refinancing to cash dividend distribution. The above two may affect corporate's dividend policy.The paper begins with a literature review and then followed by background analysis and empirical research. It is divided into seven chapters.Chapter one is an introduction of the research background, issues, contents, framework and the contribution of the paper.Chapter two is the literature review of research on dividend policy and financial constraint. We first introduce the dividend irrelevance theory which proposed by Miller & Modigliani. Then we introduce theories which relax the assumption of MM theorem, such as taxes clienteles, signal theory and agency theory and so on. Finally, we introduce the research on financial constraint, specially the relation between dividend policy and financial constraint.Chapter three shows the character of listed companies in China. This paper focus on the following four aspects:(1) whether to payout, (2) how to payout, (3) how many to payout, and (4) dividend smoothing. And we find listed company is unwilling to pay dividend and the amount of dividend is relative low.Chapter four provides evidence about how cash-flow uncertainty affects corporate payout policy from the view of financial constraint. Using all the A-share listed corporations in Shanghai and Shenzhen stock exchanges during 2003 and 2006 as sample, we find that cash-flow uncertainty has a negative impact on the amount of dividends as well as the probability of paying dividends. We use three different criterion of financial constraint——the nature of enterprise,firm size and KZ-index to distinguish financial constraint corporation and non-financial constraint corporation and find that cash-flow uncertainty has smaller negative effect on payout policy in corporate facing lower financial constraint.Chapter five is empirical research on the relationship between cash flow uncertainty, financial constraint and dividend smoothing. We examine that whether company follow stable dividend policy and choose other way to payout when they face cash flow uncertainty and financial constraint. We find that company is unwilling to smooth its dividend. However, the dividend policy is more stable from 2000. And cash flow uncertainty and financial constraint also have negative impact on dividend smoothing.Chapter six examine whether the motivation for refinancing affects the company's cash dividend policy. Using data about China's listed companies from 1999 to 2009, our empirical analysis shows that before 2001, the relationship between motivation for refinancing and the cash dividend is not obvious, but since 2001, after the Securities Regulatory Commission (SFC) introduced a policy that directly linked qualifications for refinancing to corporate cash dividend situations, companies with higher motivation of refinancing are more likely to pay cash dividends or pay more cash dividends.Chapter seven is the conclusion of this paper. It consists of the research finding, the advice we made, the limitations of this paper and the directions for future research.The major contributions of this paper are in the following aspects. (1) From the aspect of financial constraint, we do empirical research on the relationship between cash flow uncertainty and dividend policy. (2) We study the impact of cash flow uncertainty and financial constraint on dividend smoothing. (3) The first time to examine and evaluate the impact of SFC's policy on the listed company's dividend policy.