The Motivation Of Stock Dividend And Transfer Of Reserve To Common Stock Of China's Listed Companies

The study of financial market microstructure theory focuses on the process of assets pricing and its results under the established of market microstructure, which reveals the impacts of market microstructure on the price formation process of financial assets. The integration of market microstructure and corporate finance can be more profound analysis of the financial decision and the reactions of investor, which has remarkable significance to the following financial decision. Based on market microstructure, this paper analyzes the stock dividend and transfer of reserve to common stock of China's listed companies. The premise of frequent stock dividend and transfer of reserve to common stock is coherent with performance after ex-dividend and management motivation, so this article focuses on the market response, the impact on market and investor behavior, through analyzing the performance of markets and investor between before announcement and after ex-dividend, test the signaling hypothesis, liquidity hypothesis, trading range hypothesis, and then provide a new hypothesis which can perfectly explain the management motivation of stock dividend and transfer of reserve to common stock.Based on market microstructure theory and relative research about stock splits, the paper starts the research by following: (1) the market reaction of stock dividend and transfer of reserve to common stock. Through the calculation of CARs of the announcement date and ex-dividend date and the analysis of their determinants, this paper discusses investor reaction and the information content of stock dividend and transfer of reserve to common stock. The results show that investors have positive evaluation on the announcement date and negative response on the ex-dividend date. Management ownership, return volatility have significantly affect investor reaction. In addition, the results of Logit model studies show that the motivation of stock dividend and transfer of reserve to common stock may lie in expanding firm size. (2) The stock changes around stock dividend and transfer of reserve to common stock. Through analyzing the change of liquidity and volatility between before announcement and after ex-dividend, this paper discusses the change of investor behavior and management motivation, then tests the applicability of liquidity hypothesis in china's stock dividend and transfer of reserve to common stock. Based on market microstructure, the paper sets liquidity and volatility indicators and use non-parameters test to analyze the change of liquidity and volatility. In addition, according to firm characteristics and the features of stock dividend and transfer of reserve to common stock, group and test the changes of liquidity and volatility. The results show that liquidity indicators based on market microstructure don't change significantly, but liquidity indicators based on date data significantly improve, which reflects that investors prefer to stock dividend and actively participate, leading to liquidity based on date data improve, but investors' transaction costs don't change. Therefore, the explaining power of liquidity hypothesis in our stock market is limited. Intraday-volatility and daily return volatility after ex-dividend significantly increase, which means the increase of noise trading and the change of stock value. The factors of stock dividend and transfer of reserve to common stock and firms' size affect significantly the changes of volatility. ( 3 ) Stock dividend and transfer of reserve to common stock and information asymmetry. Through estimating the LSB model and the EKOP model to measure the degree of asymmetry information, use non-parametric test to compare the change of asymmetry information. The results show that the degree of asymmetry information doesn't change remarkably, which indicate that the signaling hypothesis does not apply in China's stock market. It is worth noting that informed traders and non-informed traders have significantly increased after ex-dividend. In addition, the trends of market significantly impact the changes of asymmetry information. (4) Stock dividend and transfer of reserve to common stock and investor behavior. Through analyzing the structure of investor and their trading behavior, test the application of the trading range hypothesis. Firstly, identify the types of investors according to transaction size, and then compare the changes of investor constituted. The results show that the number of individual investor, institutional investor and large investor increase significantly, which means the increase of the number of shareholders. At the meantime, the increase of the proportions of large investor and institutions investor lead to the increase of ownership concentration. And then, construct the indicators to measure investors order aggressiveness and research the change pattern and the determinants. The results show that investor's order aggressiveness significantly decline after ex-dividend, the determinants of order aggressiveness of before announcement are different after ex-dividend. Volatility and order size respectively has positive and negative effects on the order aggressiveness after ex-dividend; the reason is that more individual investor participates after ex-dividend.Based on the above analysis, the paper proposes the attention-getting hypothesis to explain the management motivation of stock dividend and transfer of reserve to common stock in China's stock market. The hypothesis think that when the evaluation system of stock is inefficient and investor prefer to stock dividend, in order to expand firm size, the listed companies sign the history good information by stock dividend and transfer of reserve to common stock and attract market attention. Because of the increase of investor's pursuit and the re-evaluate about intrinsic value of stock, the share price raise and firm size expand. However, the investor beliefs about stock value are heterogeneous, it is necessary to maintain the steady growth of profit in order to realize the purpose of expanding firm size. Only those firms who experience market test and maintain good performance can really achieve the original purpose of expanding firm size.