Study On The Relationship Of Chinese Listed Companies' Ownership Structure And Dividend Policy Based On Information Asymmety

The subject of corporate dividend policy has captivated economists for a long time, signaling theory and agency cost theory is based on the market imperfection of asymmetric information, they argued that dividends can be used to reduce agency costs or as signaling devices to convey valuable information to the public. In China there exists a Chinese version of "dividend puzzle" because of the exist of tradable and non-tradable shares. Prior research analyzed Chinese corporate'dividend policy applying signaling theory or agency cost theory separately, but they did not answer the puzzle. In fact, the inners (controlling majority shareholders or managers) might use dividend policy to pursue private benefits, and they might carry out dividend payment to signaling under some institutional constraint. It is necessary to consider corporate disclosure strategy in order to judge the inners'motivation of dividend payment, controlling majority shareholder acting in its self-interest,does not fully disclose relevant information to shareholders. The combination of signaling and agency cost paradigms can help to resolve this question.Basing on dividend signaling and agency cost theory, using the measure of information asymmetry of market microstructure, the purpose of this study is to investigate the relationship of ownership structure and dividend policy of Chinese listed companies under the background of concentrated ownership structure and the behavior character of ultimate controlling shareholders. Our study is in favor of explaining the motivation of corporate dividend payment and the difference considering ownership structure attributes. It can discover some law and mechanism of dividend policy of Chinese listed companies, and provide empirical evidences to extend existing dividend theories, as well as providing some policy suggestion to improving the ownership structure.(1) Based on independent-Samples-T-test and regression methods, the dissertation investigates influence of ownership structure features on information asymmetry in the equity market. The results demonstrate that ownership structures can affect the level of information asymmetry, the more serious deviation of controlling right and cash flow right, the higher information asymmetry of its stock, high fund-holding always accompany with higher information asymmetry. We also find significantly positive correlative between ultimate cash flow right and information asymmetry, the controlling shareholder with low cash flow right have intendancy to conceal private information. The balance power of other majority shareholders can improve the information environment, and non state-owned company provides less transparent information compared with the state-owned company. Based on dividing samples into groups according to the deviation of cash flow right and control right, we investigates the relationship between ownership structure features and information asymmetry with t-test method and found that there is higher level of information asymmetry and higher fund-holding in the group with deviation.(2) Taking listed companies'2009and2010annul dividend announcements in Shanghai stock market as the events, based on high frequency trading data and Wilcoxon Rank-sum Test to investigate the changes of information asymmetry subsequent to corporate dividend announcements. The results show that corporation dividend policy is informative currently; there are different levels of information asymmetry between announcement of dividend-payer and dividend-nonpayer, and corporate with high dividend and low dividend. The results of further Simple Linear Regression indicate that dividend announcement can evidently reduce the level of information asymmetry and improve the information environment for corporate with high dividend.(3) The dissertation further provide evidence on the propensity and size of dividend payment of Chinese listed company by employing Probit Binary Choice Model and multivariate regression model, and test whether ownership structure features have impact on dividend policy. The results demonstrate the probability of dividend payment increase with higher institutional shareholding and higher concentrated cash flow right, and the probability of dividend payment increase with serious deviation of controlling right and cash flow right, the state-owned company have higher probability to pay out dividend compared with the state-owned company. Dividend paying firms are larger, more profitable and have greater proportion of retained earnings of total equity that nondividend paying firms. But the effect of the size of dividend of ownership structure is different. The result indicates that the balance power of other majority shareholders significantly positively related to size of dividend. But there is not significantly correlative between size of dividend and the deviation of controlling right and cash flow right, higher institutional shareholding don't urge corporate insiders to disgorge cash. And the size of dividend is not consistent with the firm's capability of dividend payment, and the dividend decision-making is at discretion.The empirical study shows that the difference of ownership structure feature is the important factor that affects the level of information asymmetry and corporate dividend policy; ownership structures have statistically significant effect on corporate governance. The more serious deviation of controlling right and cash flow right, the higher information asymmetry of its stock, but the insiders of corporate have no motivation to improve the information environment through high dividend payment. Institutional investor did not help to improve the equality of disclosure and increase the dividend payment ratio. The firms with low concentrated-ownership have lower probability to pay out dividend, and they have intendancy to conceal information and pursue private benefit through the control of high retained earnings. The balance power of other majority shareholders has positive effect on information environment and dividend payment, and they exercise their supervisory function. Although the disclosure quality of state-owned company is higher compared with non state-owned company, but the size of dividend payment of state-owned company is not consistent with its capability of payout.Taken together, our study provide some policy suggestions based on the results that include deepening the reform of ownership structure and improving the balance power of other majority shareholders; strengthening the regulation of related transactions, occupation of funds and illegal guarantee and encouraging controlling majority shareholders to increase dividend acting in its self-interest; improving the legal protection of minority shareholders such as establish category system of voting and strengthen the supervision of institutional investor.