The Study Of Dividend Policy Under Agency Cost Hypothesis

Dividend policy means this kind of decision making: how to distribute the profit aftertax between shareholders and company itself. A quota preserves is guaranteed the company development for a long time. And the cash dividend has formed the cash flow which the shareholders received. This paper tried to analyze the agent cost affection on dividend policy, using the theories of property rights economics and information economics and the empirical approach. From the angle of theory, first , this paper has introduced the main theories of dividend policy in the west, then from the angle of information economics, the author illustrated how to understand dividend policy under agent cost theory. And analyzed the conflicts between the parties involving the dividend making. Third, this paper has analyzed the causes of agent problems in our listed companies, and how the agent cost effects the dividend policy. At last, according to the agent problems in dividend policy, the author has advanced some suggestions which will help build standard dividend policy and promote the capital market development.From the angle of demonstration, this paper first has introduced the special ownership structure of our listed companies and the diversity of dividend payout. Then author used the cost minimization model to analyze the dividend policy of 716 stocks listed in Shanghai Stock Exchange during 1997-2004.Although some necessary changes have been made into the model, the results suggested that the cost minimization model was not suitable for the situation in China. Author thought maybe it was mainly because our listed companies had special ownership structure which the stated-owned rights was in the position of domination. This lead to the default of controlling agent costs by dividend policy.