Analysis About Impact Of Shareholding Concentration On Cash Divident Policy

Cash dividend policy of the company has a direct impact on cash flow, company value and shareholder's return and so on. It is a very important financial decision-making for modern corporate. For a long time cash dividend policy attract a large number of scholars research, and proposed "bird in the hand" theory, MM theory, tax differential theory, signal theory, agency theory and so on. Research on cash dividend policy based on the ownership concentration degree is a relatively new perspective, because of our unique ownership structure, as well as inadequate capital markets, our cash dividend policy of listed companies influenced by the equity structure in so many ways, there are conflicts between the non-tradable shareholders and tradable shareholders, the state-owned controlling shareholders and corporate management, major shareholders and the minority shareholders. Therefore, under the influence of various factors, there is no wild accepted conclusion about this research. Meanwhile, after the share-trading reform of listed companies in China equity of shares will be tradable, as non-tradable shares are no long to exist, the ownership structure of listed companies possibly had certain change, which may change the way in which ownership structure influence the cash dividends policy. Therefore when the stockholder's rights structure is having the radical change, the research appears more meaningful.Agency theory is one of the mainstream theories to explain the current dividend policy, based on separation of ownership and management, different target of both sides, as well as information asymmetry will lead to agency problem. In the company's business activities, there are managers and shareholders, controlling shareholders and small shareholders, agency problems exist between the two groups. Dividend policy can be solved these agency problems. Based on the characteristics China's capital market in the existing dividend policy theory, agency theory is the best theory to analyze the cash dividend policy; therefore, this article is based on the agency theory. This paper is divided into seven chapters, main points of each chapter are following:Chapter I is the introduction, to describe the background and purpose of this research, the way of the research and the basic framework, research methods and the expected contribution of this article.Chapter II is literature review, first of all it is the literature overview of the research on ownership concentration impact on cash dividend. Foreign research generally support the theory of equity concentration is negatively correlated with the level of cash dividend payments, while the domestic research generally support the stock concentration was positively correlated with the cash dividend. Because of China's special ownership structure, domestic research didn't come to a same conclusion.Chapter III is the theoretical analysis, first elaborated the connotation of ownership structure, and describes the content and major dividend policy. This paper selected agency theory as a theoretical basis for this article, in the company's business activities; there are conflicts between managers and shareholders, controlling shareholders and small shareholders, agency problems between the two groups. In the case of dispersed equity structure, the main agency problem exists between shareholders and managers, on the opposite side; the main agency problem exists between controlling shareholders and minority shareholders.ChapterⅣanalyzes the trend of the ownership structure and cash dividend policy of listed companies after share reform. As the non-tradable shares has a higher proportion in the equity structure, a higher proportion of state-owned shares and a high degree of concentration, cash dividends influenced by all these three factors,so it is a complex problem. Therefore, it is necessary to analyze the trend of ownership structure and cash dividend policy after the share reform of listed companies, and thus begin this research. The data shows that after the equity structure reform the structure of the listed companies have changed, and so the conflicts between different shareholders have been solved in some way. So doing research at this time on implications of equity concentration to cash dividend policy may come to new conclusions.Chapter V is the research design, based on the analysis above, defining variables, collecting data, and to do research by descriptive statistics and linear regression model. Although after the share reform equity concentration declined, but it is not enough to solve the conflict completely, because the ownership structure of listed companies is still show the characteristics of a higher degree of equity concentration. In this paper, there are three hypothesis, hypothesis I:the higher concentration of stock of listed companies, the more inclined to the distribution of cash dividends; hypothesis II:In a cash dividend distribution, the equity concentration has a positive impact to the level of dividend payments; hypothesis III:In a cash dividend distribution, the controlling for the first major shareholders has a positive correlation with the level of dividend payments.Chapter VI is the empirical results, using least squares estimation of the regression model and test the heteroscedasticity. Test results show that there is heteroscedasticity, so using a re-weighted least squares regression estimates again. The results verify the hypothesis 1 and hypothesis 2, that is, stock concentration has a positive correlation with distribution of cash dividends, hypothesis 3 is not confirmed, that is, controlling over the company of the largest shareholder has a negative correlation with the level of cash dividends. Results validate that after the reform it is still a high degree of concentration so the conflicts between the major shareholders and the minority shareholders still exist. So, equity concentration and the distribution of cash dividends show a positive correlation. Meanwhile, with equity concentration reducing, the first shareholder's preference for cash dividends reduced, due to the high level of cash dividends will lead to cash flow to the other shareholders, and as the largest shareholder who can be easily involved in connected transaction or capital taken up to replace the benefits of the cash dividends, while avoiding the other shareholders of the benefit-sharing. In the meantime, the balance power of other major shareholders to the largest shareholder enhanced when the proportion of the largest shareholder decreased, so the corporate decision-making will be reflected the other shareholders'benefit,Chapter VII gives the conclusions and policy recommendations, the conclusions of this research are (1) after share reform listed companies' ownership structure changed, proportion of the state-owned shares and the equity concentration has declined; (2) the way equity concentration influence the level of the cash dividend payments has been changed while the equity structure changed, controlling over the company of the largest shareholder negatively correlated with the level of the cash dividend payments; (3) after the share reform equity concentration has a positive correlation with cash dividend. On this basis, policy recommendations are proposed in this paper, including the strengthening supervision and management of state-owned assets, strengthening the supervision and punishment on exceptionally high levels of listed companies, levy capital gains tax and increase the rate of high levels cash dividends to regulate the behavior of listed companies and information disclosure. This paper puts forward the deficiencies and limitations of the research process.The main contribution of this paper is (1) the domestic research based on agency theory to analyze the relationship between the equity concentration and cash dividend policy is not so much, while the research has not yet reached a uniform conclusion, the results of this paper can enrich the domestic research; (2) this paper based on the data after the share reform of listed companies, it is more in line with the actual situation in China at the present stage, has practical significance.The limitation of this paper are that (1) The empirical data of the study as due to the end of 2008, the regression model using data for only two years, there is a certain chance, while at the end of 2009 only 63.86 percent of the tradable share reform companies will realize. At present, China is still a considerable part of the listed companies tradable unrealized, with the development of capital markets, hoping in the future it can be able to collect more data after the share reform to make a comprehensive comparative analysis; (2) this research includes only the degree of concentration within the company's equity, profitability, cash-rich situation, the company the size of these factors together, the outside factors are not involved, especially the financial crisis which may influence the result, it is need to collect more data in the future and find a way to remove the impaction of the crisis.