An Analysis Of Behavioral Finance On The Dividend Policy Of Listed Firms In China

On the basis of extensive literature examining, this paper studies the dividend policy of the Chinese stock market theoretically and practically and discusses some tricky phenomena, then it forms some relative suggestions. This paper consists of six parts.The first part is introductory, mainly including the topics of the background and significance of the paper, literature review, research ideas and methods, as well as innovation of the paper.The second part is an overview of behavioral finance theory. Firstly, it introduces the basic theories and research results of behavioral finance, including the behavioral finance research in the West. In the nineteenth century, two works of Gustavo Lebon's "The crowd" and Charles Mackey's "Extraordinary Popular Delusions and the Madness of Crowds " pioneered the study of group behavior in financial markets, then it came the BSV model, DHS model, HS model and the BHS model etc, which aimed to explain the mystery of the stock market. In China, although there are few studies on the behavioral finance, we can expect the bright future. Secondly, it discusses the differences between the behavioral finance and traditional finance and concludes that it lies in whether the market is efficient and the consumers are rational. Thirdly, it studies the dividend research under the framework of behavioral finance. It firstly introduces the theory of traditional financial dividends: Bird-in-the-hand, Irrelevant dividend view, Tax differences Clientele effect theory Signaling theory and Agency Costs theory, it also details the theoretical research results homely and broadly.The third part is an analysis focusing on the status of dividend distribution policy of listed firms in China. There are many problems of dividend distribution of the status in China's listed companies. The phenomenon of not dividend distribution is universal, which is very different from the capital markets in developed countries, where the distribution of cash dividends to pay dividends is used in most listed companies. Listed company's overall dividend payout ratio is significantly low and more funds retained in the Company's control. The phenomenon of shortage of dividend allocation co-exists with the excessive dividends allocation. In order to cater for the fundamental status of Chinese stock market, there are several of dividend polices, and stock dividend is the largest part. However, we could expect, through the law of survival of the fittest, cash dividend would come to the most part.The fourth part is the empirical analysis that based on behavioral finance dividend policy. It bases on statistics of the actual dividend distribution from 2000 to 2008 of listed companies, and establishes a regression model, to testify the non-effectiveness of China's securities market and listed company dividend policy. It shows that: the cash dividends of listed companies the motivation and the model chosen degree of explanatory variables associates tightly, the higher the return on assets, the higher profit-sharing ratio; the higher the cash flow debt ratio, the higher the corresponding cash distribution. A high proportion of the outstanding shares, the dividend is actually reducing. And the paper carries out an analysis of behavioral finance to the results.Part five is the advices to improve the dividend policy of listed companies in China. Firstly, listed companies should carefully select the appropriate dividend policy, to maximize shareholder's equity objectives in line with dividend policy that are aimed at different market conditions, a reasonable form of dividend adjustment; secondly, it should reach an effective balance between the proportion of retained earnings and shareholder dividends in an attempt to get the best distribution; thirdly, it should be chosen to improve the company's shareholding structure of the dividend policy, to reach the long-term development for the company. Secondly, it should strengthen the external constraints of listed companies. On the one hand, through the standard dividend distribution program development and information dissemination, it could enhance information transparency and effectiveness, facilitating the investors to make the right investment decisions to reduce the existing anomalies in the market. On the other hand, it should improve the investment knowledge of investors, making it the leading force in the stock market, to reduce the non-rational behavior in the stock market. Finally, it should improve the protection mechanism of rights and interests of the small shareholders, to constrain the upper bound by major shareholders, so as to contribute to the company's steady development.Part six is the conclusion of the paper, and it also describes the deficiencies and defects of this paper.