A Study On The Influence Of The Ownership Structure On The Dividend Policy Of Listed Companies In China

Dividend policy of the listed company is one of the three core problems in modern company's financial management. Appropriate dividend policy can not only develop a good reputation for the company, but also arouse enthusiasm of many investors. So appropriate dividend policy can help companies to gain stable developing conditions.There are many factors that influence the cash dividend policy. This paper focuses on how the ownership structure affects it. Ownership structure in China is very different from other countries. It was originally designed for political purpose, which makes company's cash dividend policy quite special from the very beginning. Because a large number of non-tradable stocks existed, the formulation of the cash dividend policy in our country is not rational. First major shareholders prefer cash dividend and they have incentives to transfer cash from listed companies to them by distributing cash dividends.In order to solve many problems which the special ownership structure has brought, the Reform of Non-tradable Shares was formally launched in 2005. Most of the listed companies had finished the reform by the end of the year 2006. Therefore to study how the reform affects the ownership structure and the cash dividend is significant.Firstly the paper introduces the basic theories of dividend policy . Then it presents the general situation of the cash dividend policy of listed companies in China. The dividend policy of the listed company is unstable and incontinuous. And in several years, most listed companies did not pay out cash dividend. In some companies, the cash dividend payout ratio was abnormally high. The unhealthy and unique ownership structure of China's listed companies was partly responsible for those abnormal phenomena.Secondly the paper studies the influence of the ownership concentration on the dividend policy. The research shows that first major shareholders have the motive to transfer cash from listed companies through cash dividend policy. While the second major shareholders can prevent the behavior of the first major stockholder.Thirdly the paper studies the influence of the shareholder structure on the dividend policy. The study shows that legal-person shareholders are in favor of higher cash dividend policy. The other two types of shareholders do not have a strong impact on the cash dividend policy.Fourthly the paper studies what the Reform of Non-tradable Shares has brought to the ownership structure and the cash dividend policy. The paper analyses the data of the year of 2006. The result shows that the impact is not outstanding. It takes time for the reform to act effectively. We should all look on the bright side.Finally the paper makes a summary of conclusions in this research. Then it gives out some usable and feasible advice .We believe they will play a positive role in standardizing the cash dividend policy.