| The purpose of this thesis is to analyze the contributing factors that affect dividend policies of public companies and the problems existing in the execution of dividend policies. At the same time, it is an attempt to provide an analysis frame for Chinese companies' dividend decision in actual practice. Dividend policy research is one of the important branches of financial economics. It has also puzzled the economics domain for decades. Fisher Black named it "the dividend puzzle" in 1976. He said: "The more we exert ourselves to research it, the more it is like a puzzle." Up to now, economists have not found a generally acceptable answer to this riddle; dividend policy remains to be a puzzle.Because "dividend" is the beneficial link between companies and investors, a correct cognition of dividend theory has an important practical directive function. The history of the Chinese stock market is very short and the comprehension of dividend theory and practice is relatively shallow. My thesis will analyze the dividend policy of Chinese companies in respect to empirical testing and quantity analysis by using western countries' research findings for reference.Dividend policy is an important issue in the process of profit distribution by public companies. The year's undivided profits together with undivided profits retained from former years compose fund resources for dividends. In the process of profit distribution, after-tax profits are firstly used to cover the loss, surplus accumulation funds and public welfare funds are secondly drawn. Such first and second profit distributions have specific law stipulations (such as Corporation Law of PRC). These kinds of profit distributions are a normal part of dividends and are of a fixed percentage. However, dividends distributed to the shareholders do not have specific regulations. Because dividend distributed to the shareholders is flexible, it becomes an important issue for the management of public companies' profit distribution. Rational dividend policies after the first and second profit distributions are drawn, will play the primary role of making the companies' production and operations successful and creating favorable exterior circumstances; secondly, it will provide cheap fund resources; thirdly it will be used to stabilize the stock market; fourthly it will be used to win over potential investors.Carrying out rational dividend policies by public companies has prominent meaning to both the companies and the shareholders. Establishing rational dividend policies need guidance from mature dividend theories. But the rationale of dividend theories has been argued furiously in academia for a long period of time. As yet, there isn't a uniform theory used to identify economic phenomenon in empirical testing. A uniform theory is not only relevant to dividend policies and share prices, but it also has impact on the shareholders' wealth. Nevertheless, western countries have done a lot of work on dividend policies and have drawn some significant conclusions after 70s. In China, however, dividend distribution theory and practice are still groping. Recently, public companies have the tendency to blindly do what other companies deem as popular and think little of the middle and small shareholders' interests. This, to a certain extent, reflects the weakness in China's dividend theory research. China mostly researches dividend policy from the viewpoint of financial theory. This kind of research lacks systematic empirical testing and quantity analysis. By using western countries' successful dividend theories and empirical testing analysis methods, this thesis is an attempt to analyze Chinese public companies' dividend policies and make quantity analysis from an empirical point of view. The whole thesis is divided into five chapters: Chapter one is the preface. This chapter discusses several concepts like dividend, dividend policy and other relevant concepts. It also makes a comparative analysis between Chinese dividend distribution in its present situation... |
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