Research On Dividend Policy Of Chinese Listed Company

Dividend policy is one of the earliest topics in finance research and is still a much-debated topic over the last five decades. As the literatures indicate, dividend policy is not only affected by corporate financial characteristics, but also affected by the internal corporate governance merits from the micro-level. Recently, as further development of the principal - agent theory, the meso-level external market power is also an important factor. Moreover, as shown by international comparative corporation governance literatures, the macro-level institution like investor protection law and its implement system is also another important factor to influence the dividend policy of listed company.Meanwhile, dividend policy can be regarded as one kind of institutional arrangements made by the listed companies under Chinese special institutional background and corporate governance structure. Optimal dividend policy is good for further development of the corporation as well as to maximize the corporate values. However, in recently years, as the study goes deeper, more and more evidences shows that dividend policy is becoming the channel for ultimate controlling shareholders to occupy the minor shareholders. Since the equity are not tradable, ultimate controlling shareholders can not gain profits directly from stock market. They have to redound themselves by some abnormal dividend policies, such as irrational dividend pay-out, vicious cash dividend and ultra-ability cash dividends, which have infringed the rights and interests of the other shareholders. Making further study on the fundamental factors of dividend policy, promoting methods to prevent the embezzlement of ultimate control shareholder, strengthening the consciousness of the listed company to redound upon the shareholders, inducting the dividend distribution of listed company rationally, and protecting the rights of minor investors have become the prevailing topics of the Chinese stock marketing research.Despite of the overwhelming importance of dividend policy, systemic study is still rare so far. The existing literatures just emphasize one specific factor, which can't converge to an integrated and applicable analytical framework theoretically and lacks of religious empirical research design as well as full and accurate empirical evidences.This dissertation, taking consideration of China-specific institutional background and economic environment, is the first one to bring forward a systemic analytical framework of the dividend policy based on theories of property rights and corporate governance. Under this structure, we survey on the dividend literatures home and abroad, and we analyze the impact of ultimate property rights characters and its control rights structure, the products marketing competition, investor protection laws and its implement efficiency, the regional law standard, etc, on Chinese listed company's dividend policy. Using samples from listed company of Chinese stock market, we test the relationship among property rights, corporate governance and dividend policy from the micro-, meso- and macro-level, which corresponding to self-help, medium and judicial protection. This dissertation divides into seven parts as follows:Chapter one briefly introduces the issues, content, framework of this dissertation as well as its contribution and innovation to research in this area.Chapter two puts forward the analytic framework of dividend policy based on property rights and corporate governance theories, traces the origins and surveys on the dividend literatures under our framework, which points out that the micro-, meso-and macro- level institutional arrangements are the main factors to influence dividend policies.Chapter three investigates Chinese listed company's ultimate property rights ownership and its correspondent control rights structure from the micro level, and also research on whether they can influence the dividend policy of Chinese listed company.Chapter four tests the product market competition's influence on dividend policy from the meso-level. Based on the sample of Chinese listed company from 2004 to 2007, we study whether the market competition can influence the possibility for Chinese listed company to pay dividend and how much if they pay.Chapter five examines whether investor protection laws and its justice system can influence the dividend policy of listed company from the macro level. Based on the fact that the macro institutions have time serial changes and regional differences in one country, we study whether the improvement of investor protection laws and the aggrandizement of law enforcement can lead to the optimal dividend payment of listed companies.Chapter six analyzes the interaction and cross influences between corporate governance and dividend policy from the micro, meso and macro level systematically. Concretely speaking, we controls the influences of fund embezzlement by ultimate controlling shareholders and further exam the relationship among corporate governance, investor protection and dividend policy.Chapter seven summarizes the research results and draws conclusions, also points out the limitations of this article as well as future areas of the research.The main conclusions of this article are as follows:Firstly, almost 80% of Chinese listed companies are controlled by SASAC (State Asset Supervision and Administration Commission) , regional SASAC and individuals. Listed companies with stated owned ultimate property rights occupy almost two thirds of all, while that with private ultimate property rights are just over one fourth. The ultimate controlling shareholders need to hold 38.88% shares averagely to control the listed company. Few of them adopt the cross listing or flat controlling rights structures. They mainly adopt the vertical controlling rights structure to control the listed company.Secondly, the characters of ultimate property rights and its corresponding ownership structure have impacts on dividend policies indeed. Specifically speaking, listed companies with stated own ultimate property rights have lower dividend possibility and payment level than those with private ultimate property rights. The controlling rights of the ultimate controlling shareholder is higher, the dividend payment is obviously higher. And the cash flow rights, the discrepancy degree of ownership and control, the controlling hierarchy as well as the numbers of controlling chain have influenced the dividend policy of listed company in different ways.Thirdly, the external corporate governance mechanism influences the dividend policy of Chinese listed company. The relationship between product market competition and dividend policy grows negatively. As the investor protection law becomes weaker and the law implement efficiency becomes higher, the possibility and level of dividend payment becomes higher. The regional law also influences the dividend policy in some circumstances, but it is not the essential factor comparing to the investor protection level and law enforcement efficiency.Fourthly, listed company may set down the dividend policy only after taking the fund embezzlement degree of ultimate controlling shareholders into account. Infringement of the rights and interests of minor stockholders by ultimate controlling shareholders happens more probably in the lower competitive industry and in the case of weaker investor law protection and low implement efficiency. Ultimate controlling shareholders'preference to fund embezzlement or dividend policy depends on periods of time and regions.The above points demonstrate that our dividend policy analytic framework based on property rights and corporate governance theories is feasible and applicable, and they also substantiate that the dividend policy of Chinese listed company is influenced by ultimate controlling shareholders and their preference, by control rights structures and exterior product marketing competition as well as investor protection law system, etc.Different from the existing literature, this article has some improvement as well as innovations. The main points are listed as follows:In the literature review, this paper is the first one to systematically survey on the dividend under the unique framework based on property rights and corporate governance theories. Different from existing literatures, this paper integrates the voluminous dividend literature on the basis of agency cost theory from micro, meso, and macro level, which shows the evolvement route of the dividend literature clearly.In the theoretical analyses, this paper is the first one to put forward the relationship framework of property rights protection, corporate governance and dividend policy, which was inspired from the four-level social analysis framework created by Williamson. This analysis frame work shows the essence nature of corporate governance, and it reveals all possible dimensions of corporate governance's influence on dividend policy.In the empirical study, this paper is the first one to test the relationship between corporate governance and dividend policy systematically using the sample datum in single country, which has provided the good evidence to empirical dividend literature from China.First of all, the angles of view on ultimate property rights and product marketing competition this paper used provides novel ideas to improve the supervision efficiency of Chinese listed company and strengthens the listed company's consciousness to rebound the shareholders.Second, there is no study on the relationship between dividend policy and market power of China so far. This paper tests the corporate governance's effect of product market competition on dividend policy using Chinese listed companies as samples, which supplemented the literature with new evidence from China.Third, there is still no research investigating the influence of law enforcement efficiency as well as investor protection on Chinese listed company's dividend policy. This paper does especially considering the law enforcement efficiency as well, which provides meaningful evidence to the research of the dividend policy and "Law and Finance".Fourthly, the existing literatures do not further study the effect of exterior and interior corporate governance mechanism on divided policy, and they have not seized the influence of other tunnels like fund embezzlement, which was successfully and clearly done in this paper. Furthermore, traditional OLS regressions can't glean all possible influences by other latent variables. By using panel data model, we try to control them and let the coefficient estimation be more precise.The main limitation of this paper is that we need more robust tests due to our lacking of other substituted proxy for the investor protection and law enforcement efficiency. Further study is to find a better proxy. Moreover, the newly study is beginning to emphasize on culture influence to dividend policy. The relationship of culture and dividend policy will become the hot topic of future theoretical and empirical study.