A Study Of The Impact Of Income Tax On The Dividend Policy Of Listed Companies In China

As one of financial activities, which include investment, finance and dividend activities, dividend policy is the core area of financial policies, and it is an important topic in the academic circle of finance and economy. This is an important issue as"dividend puzzle", which leads the scholars abroad to a long study on it in the last 50 years, but still, it is hard to have an agreed conclusion as every theory has different disadvantages. Generally speaking, the research abroad on this topic is more mature than it is in China. The stock market in China is newly emerging and the dividend activity of listed company is also becoming concerned. As a result, the research on this issue is prevailing.There are a lot of factors that will affect the dividend policy, both inside and outside the company, including the ability of profitability, the gearing of the company, the cash flows and taxation etc. As to the relevant researches that on the factors which influence the dividend policies of listed companies, we can find out many cases. However, the research on the issue of how the taxation influences the dividend policy is still a new topic which worth studying according the situation in Chinese security market. This paper is about to find out how the income tax and corporate tax will affect the dividend policy based on the numerical statement and relevant analysis of the listed companies in China.Most of current research on the effect of taxation to the dividend activities is based on the income tax, which is that whether the tax on dividend will affect the dividend policy. This kind of research means to find out the relationship between the expected yield and dividend by using the Capital Asset Pricing Model. Once there is a positive correlation between them, there is an indication that the tax on dividend will lead a higher expected return of investors, and this will decrease the volume of dividend. Based on this way of study and introduced new controlled variables of scale of the company and the BV/MV, we study on the monthly financial information of public company to get a conclusion that if the tax on dividend will affect the dividend policy. Meanwhile, we will start a new study on whether the corporate tax will affect the dividend activity of the listed company either. This paper starts this research buy setting up a multivariable linear regression model which sets the dividend payout ratio as dependent variable and the corporate tax rate as independent variable, as the same time, sets the net assets per share, assets liability ratio, net cash flows per share and operating income growth rate as controlled variables.According the result of the research above, we can get conclusions that: there is a positive correlation between the expected return and the dividend yield; as the same time, there is also a positive correlation between the corporate tax rate and dividend payout ratio. In another words, both the income tax and corporate tax do affect the dividend policies of listed companies.