Chinese Listed Companies' Dividend Policy And Corporate Governance

Dividend policy is main pay-out policy of Chinese listed companies. It is also an important way by which investors get return. To companies'long development and capital market'fine growth, dividend policy is very important. The perspective by which we research on Chinese listed companies'dividend policy may be dividend signaling theory, also may be corporate governance structure. But imperfect Chinese capital market, overwhelmingly large percentage of shareholding structure, the largest state shareholder, two-thirds no-tradable shares, the proper perspective isn't dividend signaling theory. It is corporate governance structure perspective.Corporate governance structure and dividend policy have close and complex relationship. Corporate governance structure determines dividend policy. Chinese corporate governance structure is different from west countries', dividend policy is also different. As outcome of corporate governance structure, Chinese listed companies'dividend policy is determined by controlling shareholder, minority shareholder and management. And dividend policy can relax agent problem. Agent cost theory points out that dividend reduces management'cash flow rights, make them lost opportunity to pursue their interest, prompt best usage of cash. And high cash dividend reduces sustained profit, make company enter capital market. Once entering capital market, company will accept more supervision. Cash dividend is also very important to capital market. Investor'purpose is profit. When they can't get return, their enthusiasm weakens. And capital market will come into a malignant cycle.But from practice, Chinese corporate governance structure is very imperfect, have many problems. And the most problem is splitting and overwhelmingly large shareholding structure. Imperfect corporate governance structure results in faulty dividend policy. In the 90th, Chinese listed companies distribute shares dividend, or nothing. Since 2000, China Securities Regulatory Commission force listed companies into distributing cash dividend. The dividend policy enters another extreme. Many listed companies pay high cash dividend. We conduct a positive research to 46 companies of Shanghai Stock Exchange in 2005. The result shows that dividend pay-out ratio and the largest shareholder have positive correlation, and the dividend pay-out ratio and public shareholders have negative correlation. Chinese listed companies'controlling shareholder is transferring and appropriating companies'profit by dividend policy. How to perfect corporate governance structure and dividend policy is a realistic and urgent problem.In China, shareholding structure, current yield, company's cash and law influence dividend policy deeply. Be different from marketed west countries, Chinese listed companies'dividend policy doesn't transmit future yield signal. It only transmits current yield. And dividend policy is very unstable. Listed companies generally lack long dividend policy target.Our study shows that there exists an inherent logical relation between corporate governance structure and dividend policy.