Preferences, Ownership Structure And Cash Dividend Policy

Dividend policy has always been one of the three most difficult fields. Since MM theory was proposed, several famous theories have been developed by loosing MM theory's assumptions. They explain dividend policy from different aspects. However, there is no consensus. Since late 20s century, domestic studies began to investigate cash dividend policy of Chinese listed companies, and achieved great successes. But they are based on western researches, so they has not achieved consensus either. Our study points out that there are significant differences between Chinese and western companies. In China, some listed companies have dominant share holders, and are undervalued for most time periods. So the dividend policy in China has unique features from the westerns. Our study develops existing models to analyze the relations among share holding structure, share holders' preference and cash dividend policies. Our Study finds that under the condition of high financing cost, there is a threshold point for the company controller's share proportion. When the proportion is below the threshold point, the company is less willing to propose cash dividend policy or pay less cash dividend, and vise versa. So we can see a U relation between the cash dividend policy and company controller's share proportion. We also find that the company controller's preference to safety would affect the threshold point, the more the controller is safety preferred, the lower the threshold point is. Our study also uses data of listed companies in China to test our theory. The results show that our theory model has significant explaining power for the cash dividend policy of listed companies in China.