Cash Dividend Policy Motivation, Earnings Persistence And Stock Market Reaction

"Dividend puzzle"has been a hot academic topic for a long time. Because of the innate institutional deficiency and the imperfect supervising system, Chinese listed companies'dividend policy display a different"dividend puzzle"from the west mature capital market. Therefore, questions about Chinese listed companies'"dividend puzzle"are raised up. Based on Chinese stock market after 2000, this dissertation investigates Chinese listed companies'cash dividend motivations from the aspect of ultimate owner characteristics and corporate governance situations. Then it inspects the long-term performance of the listed company that paid cash dividend from the view of the relationship between cash dividend policy and earnings persistence. Finally, it tests the stock market reaction to cash dividend declare to investigates investors'posture on listed companies'cash dividend policy and the role of cash dividend information in understanding earnings content. The result of empirical test shows that:1. Overall, listed companies'cash dividend policy is helpful to restrain ultimate owner's tunneling incentives. The result of empirical test shows that the level of cash dividend manifests a U shape following the increase of ultimate owner's control rights. And when the divergence of control and cashflow rights is small and the cashflow rights are great, listed company will pay more cash dividend. Moreover, if the nature of ultimate owner can be classified into government, the probability and the level of cash dividend payment is bigger. Besides this, if corporate governance environments, measured by government intervention, legal system effect, marketization degree, can give minority shareholders more protect, listed company will pay more cash dividend.2. On the whole, listed companies that paid cash dividend display a stable growth in the long-run. Compared to other companies that don't pay cash dividend, these companies'earnings and its part are more persistent. Moreover, these companies also display the stronger growth ability in the net income and operating income. But the relationship between cash dividend payout ratio and the earnings persistence is not a simple linear relation. The company with higher cash dividend payout ratio does not display stronger earnings persistence. In addition, the preference to cash dividend of the big shareholder does not significantly affect the earnings persistence.3. Investors regard listed companies'cash dividend policy with a positive manner. The cash dividend change is positively related to the stock price. Moreover, the cash dividend response coefficient is higher than the earnings response coefficient. This result indicates the cash dividend policy has the information content. In addition, although Chinese investors consider earnings information when they price listed companies'cash dividend policy, they can't use cash dividend information to judge companies'long-term performance, which is different from west mature capital market. Furthermore, research on stock market reaction in a long-term indicate that cash dividend information can significantly increase the power of current earnings explaining further stock return. This result imply that there is mispricing to higher earnings persistence of companies that paid cash dividend.The main academic contributions of this dissertation are as follows:At first, based on the theory of law and finance, this dissertation introduces the corporate governance environment factors in multivariate regressions to explain listed companies'cash dividend policy. So we can investigate it from a more basic aspect and supply a new evidence for understanding cash dividend policy.Secondly, using fruits of research on earnings persistence, this dissertation investigates the relationship between cash dividend policy and earnings based on the persistence of earnings and its part. It enriches our studies about earnings quality. It also supplies an empirical evidence for the incorrect investor impression on cash dividend value from the aspect of earning persistence mispricing.Finally, using a unique market setting in China where all firms release earnings and dividend information in the same announcement, this dissertation examines the corroboration effect of earnings and dividend. It can provide a clue and new evidence for our research on earnings information contents.