The Impact Of Ownership Structure On Dividend Policy: Empirical Evidence From China's Listed Companies

Modern dividend theories could hardly be applied to the dividend policy of listed companies in China. For the low level of dividend payment during the first decade, which has reinforced the speculation in China's capital market, China Securitities Regulatory Commission (CSRC) made cash dividends necessary qualification for secondary equity offering. As a result, the amount of company distributed cash dividend increased amazingly after 2000. However, It appeared that the market didn't treat the increase as good news, which was different from the reaction in developed capital markets. What has caused such difference among China's emerging market and those developed ones? Researches on this issue are so practically significant that they would help to provide China's capital market reform with new perspective as well as enhance the predictability of China's listed companies' financial policies and lead rational investment.An explanation of how ownership structure may influence the dividend policy is put forward in this paper. Firstly, this paper compares the dividend policy of American companies that are characterized by dispersed ownership structure to that of Japanese companies that generally have concentrated ownership structure. Then, followed by the expectation that ownership structure influence the dividend policy, the causes of difference between two countries are analyzed. Secondly, this paper tests our expectation empirically from two different aspects. One is the difference of dividend payout level among groups divided by ownership structure, and the other is the difference of dividend determinants among those groups. Empirical results show (i) China's special ownership structure (both its quantitative dimension and qualitative dimension) influence the payment level and dividend determinants of listed companies, and (ii) the cash dividend regulation made by CSRC could not necessarily lead to better minority shareholder rights protection. Finally, based on the analysis of empirical results, relative suggestions are put forward to educe optimal dividend policy and vindicate market justness.