The Information Content Of Dividend Policy Of Listed Companies In China

According to Signaling Theory, dividend is an effective signal for company to transmit its inside information. This article studies the dividend policy of China under the guidance of the principle of Signaling Theory.One of abnormal behaviors in Chinese securities market at present is company' s unreal profit. Because the cash outflow of cash dividend has certain supervisory function on company' s profit, cash dividend meets investors' long-term interests much more. However, investors prefer stock dividend, not cash dividend. What information do the two kinds of dividends contain on earth? Can investors understand the information? What factors influence their understanding of the information? This is the content considered by this article.After explaining the basic principle of Signaling Theory, this article tests the information content of two kinds of dividends by regression analysis. The empirical result indicates that what cash dividend transmitting is the information about company's earnings in the past. What stock dividend transmitting is the information regards the earnings in the current year, and the amount of information of stock dividend is limited.According to the Modern Capital Market Theory, investor always assesses the investment value of stock on the basis of the information known. The more the new information be, the greater the influence on investor's assessment of the value of stock be, which will be shown as the stock price's larger fluctuation. According to the above-mentioned empirical result, stock price should be more influenced by cash dividend than by stock dividend. However, the reality is reverse. I think that investor's understanding of the information of two kinds of dividends is interfered by certain factors coming from company's and investor's short-term actions. If we want to improve investor's understanding of the information. It is necessary to govern company's and investor's short-term actions, which can be realized by normalizing the dividend policy of company, optimizing the structure of company's administration, improving investor's quality, and perfecting the construction of securities market.