Impact Of Corporate Governance On Cash Dividend Policy

Dividend policy, financing decision and investment decision are considered as three core elements of corporate financial activities. Dividend policy affects not only the company's financing arrangements, but also the shareholder's choice of investment. Therefore, in recent years dividend policy has become the focus between the listed company and shareholders.The theory of dividend policy in foreign country can be divided the classical and modern theory of dividend policy. Black(1976) put forward the"dividend puzzle", which the financial circles has discussed and researched for several decades. Fama and Jensen(1983) consider that corporate governance is equal to controlling the agency problem. The core of corporate governance is minimizing the agency cost. Scholars have begun to apply agency theory to explain the motivation of dividend policy which listed company's developed, and provided a new view of researching dividend policy. To some extent, dividend policy is considered to ease the company's principal-agent problem. After this, it gradually built a fairly standard agency theory about dividend policy by research of foreign scholars, which lay a solid theoretical basis.The focus of foreign literature is that distribution of cash dividend can solve the agency problem and reduce the agency costs. They believe that the distribution of cash dividend can ease the agency problem between management and shareholders, reduce the abuse of company resources by management, and reduce the probability of seizing the company's interest by major shareholders, so as to achieve the purpose of protecting the interests of the small shareholders.However, the stake market in china has established and developed for almost 20 years in the context of the reform of the state-owned enterprise. Compared with agency problem arising from foreign corporate governance, corporate governance of listed companies is more complicate in china. Therefore, the cash dividend policy of listed companies in china was different from foreign policy. Moreover, compared with a large number of literature of agency theory about cash dividend policy, the literature in this area is relatively limited in china. For example , there are only 51 percent listed companies choosing cash dividend policy in china's stock market from1999 to 2007.When did the listed companies choosing cash dividend policy? What is the motivation of listed companies distributing cash dividend. The paper will research the impact of corporate governance on cash dividend policy. And the paper validate the relationship between corporate governance and cash dividend policy according with outcome model which LLSV(2000)have proposed. The paper will be divided into four parts:Part I, the paper backdates the domestic and foreign literature of corporate governance, the cash dividend policy and relationship between them. By sorting the relevant literature, the paper provides a more comprehensive description on the relationship between corporate governance and cash dividend policy. Then, the paper provide a relative clear definition on the concept of corporate governance and cash dividend policy. It is clearly that agency theory adapt to explaining cash dividend policy of listed companies.Part II, the paper generally introduces the status of corporate governance of listed companies in recent years. And then, the paper gives a particular description of cash dividend policy from 1999 to 2007 through descriptive statistics of data.Part III, the paper takes the agricultural listed company in china for example. The author selected several feature related to corporate governance as independent variable and several financial indexes as control variable. And the author put forward six hypothesis from three respects, including the ownership structure of listed companies, the board structure and the management equity incentive. Then, author applied logistic regression to build corporate governance model on cash dividend policy to analyze result of research. The result shows that corporate governance of listed companies in china accord with principal-agent theory and support outcome model proposed by LLSV(2000). The less agency problems and the lower agency costs , the more likely listed companies to make decision on distribution of cash dividend. It shows that reducing agency costs and improving corporate governance contribute to achieve target for more listed companies distributing cash dividend.Part IV, the author makes the conclusion by empirical study and give several feasible suggestion on improving corporate governance and strengthening the protection of small shareholders.