The Empirical Study Of The Stock Dividend Policy And Excess Investment Return

Dividend distribution has always been an important study focus of corporate finance, and its core is about whether the dividend policy affects corporate value. This paper firstly points out the study background and then takes a systematic review of related paper, including the review of classical theories, the signaling effect of dividend, and the relation between stock dividend and excess investment return. In the empirical study part, this paper analyzes both short and long term relationship between stock dividend and excess investment return, using the data from stock market in China in the duration of 2007 to 2010. In the short term, event study method is adopted. The result confirms the signaling effect, and the higher the ratio of stock dividend, the stronger the effect is. In the long term study, this paper uses linear regression method to test the relationship and comes to the conclusion that companies with stock dividend can bring long-term excess investment returns, however we did not find correlativity between the ratio of stock dividend and excess investment return. In the end, this paper makes suggestion to investors according to the results of the study.