A Study On The Impacts Of Earnings Quality On Cash Dividend Payment Ratio

In our confused security market, there are some “misers” in deed as well as in name.Those listed companies have considerable profit in book account, but they have low cashdividend payment ratio in consecutive years and even don’t distribute cash dividend. Thisphenomenon is adverse to signal theory of dividend and the representation of westerndeveloped security market. In order to explore the “fuse” of that phenomenon anduncover the “mysterious veil” of our listed companies’ cash dividend policy, we regardearnings quality as the point of contact and empirically study the relationship betweenearnings quality and cash dividend payment ratio. At present, earnings quality used as animportant tool of looking into companies’ operating condition has been the study focus.Earnings quality can effectively reflect companies’ actual profit. Most literatures relatedearnings quality and cash dividend payment ratio only rest on theoretical level, and thereare lack of convincing support in empirical study.The dissertation chooses the listed companies in Shenzhen and Shanghai StockExchange from2004to2009as sample and explores the relationship between earningsquality and cash dividend payment ratio. Through literature review and theoreticalanalysis, the dissertation further studies influencing factors of earnings quality andestablishes evaluation system of earnings quality through principal component analysis.Then, the dissertation empirically studies the impacts of earnings quality on cash dividendpayment ratio. The results show that, the earnings quality of listed companies those havehigh cash dividend payment ratio is better than those have low cash dividend paymentratio and the earnings quality of listed companies those distribute cash dividend is betterthan those don’t distribute. Furthermore, we find that, after2008, China SecuritiesRegulatory Commission set a higher demand for listed companies’ refinancing, somelisted companies change zero cash dividend policy and begin to distribute cash dividendin order to satisfy the demand for refinancing. Based on the results of empirical study, wepropose some related suggestions such as perfecting laws and regulations of securitymarket, improving listed companies’ earnings quality, deterring listed companies’abnormal cash dividend and strengthening supervision of security market. The researchenriches the literature on the relationship between earnings quality and cash dividendpayment ratio.