Cash Dividends, Earnings Persistence And Earnings Value Relevance,

The largest shareholder of Chinese listed company has strong preference for cash dividend. With the increasing of the largest shareholder's ownership, payout ratio increases dramatically. Why does the largest shareholder have preference for cash dividend? Different theories have different answers. Scholars build many different theories and try to explain this phenomenon.Free cash flow theory considered that cash dividend is one means to settle the principal-agent conflict. Dividends reduce the free cash flow held by the management in companies, and prevent the management from wasting cash flow. With the increasing of ownership, the ability of largest shareholder influencing management improve, therefore there is a positive relationship between large shareholder's ownership and payout ratio.However, tunneling theory explained this question differently. Tunneling theory considered that cash dividend is one means to transfer interest from listed company to large shareholder. With the increasing of ownership, large shareholder has strong motivation and ability to influence listed company. Therefore, payout ratio is higher in companies with large shareholder owning more shares.Large shareholder's preference for cash dividend can be explained by Free cash flow theory or tunneling theory. Is the purpose of large shareholder to cut down principal-agent cost or to transfer interest to itself? This is the key problem we try to solve in this dissertation. Considering the difficulty to build relationship between preference for cash dividend and motivation of paying dividend, we solve this problem in another way. Firstly we study the information content of cash dividend and the influence of large shareholder ownership on information content of cash dividend, and then we investigate the relationship between dividend and earning quality, and find out whether the relationship is influenced by Concentrated Extent of Corporate Ownership. Although the macro governance environment and investor protection of Chinese market are different from western countries, analysis of Chinese listed companies' data for the period from 2002 to 2005 indicates that cash dividend still have information content. Our empirical analysis show (1) that earnings with cash dividend are more persistent and informative, and (2) that the increasing of large shareholder's ownership has negative influence on information content of cash dividend. The results indicate a negative relationship between information content of cash dividend and largest shareholder's ownership.Main contributions of this study are (1) building a more convictive relationship between large shareholder's preference for cash dividend and motivation of paying cash dividend, and (2) that we abandon the assumption that all investor have no conflict in cash dividend. In this dissertation, we reconsider the influence of ownership structure on cash dividend's information content. Former researches usually take all investors as a whole. That is to say, there are no conflicts between investors. This hypothesis is reasonable in English or American market where the ownership is dispersive. But ownership of Chinese corporate is concentrated, we should reconsider this question. We hope to find out whether the information content of cash dividend is influenced by ownership structure. (3) Former researches usual study the relationship between dividend and earning quantity. In this article we study the relationship between dividend and earning quality.