An Empirical Research On Cash Dividend Payout Policy And Product Market Competition Of The Chinese Listed Companies

Agency issues are the ones of the most popular and also the most concerned issues of corporate governance, whose main objective is to solve how to incentivize the managers effectively under benefit conflict and information asymmetry. Product market competition is described by economists as an indispensable part of corporate governnance system and plays an important role in lowering information asymmetry and reducing agency costs by enhancing the managers' incentive ,which can improve business efficiency and make managers closer to the value of shareholders.Recent years, cash dividend policy has become one of the hot issues in the research of capital market in China. However, there're huge differences between Chinese product market and the western in developing period and micro-structure, so, whether the result of the westerners' research on product market is suitable for us and whether product market competition plays a great role upon the managers' decision-making are still questions. This paper is to answer the puzzles above. Based on the foreigners' measure of product market concentration, this study chooses samples from the year 2000 to 2006 to examine the relationship between product market competition and cash dividend payout policy ,and tries to demonstrate the dividend policy from the outside competition environment, a brand-new angel.The main conclusions of this empirical research include, firstly, the empirical evidence shows companies will take outside product market competition into account deciding whether pay cash dividend or not.The lower degree of competition will lead to easier cash dividend payment. Second, dividend paymout ratio depends on the degree of competition, the lower, the higher. The results imply that cash dividend payment is substitute for product market competition, but not outcome, which means product market competition in China has not played a great role in inducing agency costs by enhancing the manager's incentive. Moreover, it shows some limitations to corporate governance effect of product market competition still lie in China.