A Study Of Cash Dividends’ Protection Mechanism For Minority Shareholders

Because cash dividends can limit internal expropriate interests of minority shareholders, this paper plans to study the issues related with cash dividends’ protection for minority shareholders. In this paper, both of theoretical analysis and empirical research will be used to ensure that there are theoretical as well as data support. The main purpose of this paper is to test the cash dividends whether have a chance to fully play its role in the protection of minority shareholders in China, analyze the reason and make the suggestion.The first chapter will introduce the research background, research ideas and the expected contribution. The second chapter will introduce the research of other scholars. The third chapter is theoretical analysis part, this chapter will systematically analyze the cash dividend protection for the interests of minority shareholders and make theoretical basis for this paper. The fourth chapter is the part of empirical research, in this chapter will take statistical tests about theoretical analysis, compare empirical research with the theoretical analysis and give this paper’s conclusion. The fifth chapter will give some suggestions that based on this paper’s theoretical and empirical research. The sixth Chapter will list the inadequacies in the paper.Whether high expropriation risk companies pay higher cash dividends than low expropriation risk companies is used to evaluate whether Cash dividend have the opportunity to play a full role in protection of interests of minority shareholders. If the high expropriation risk companies have a higher cash dividend payment, cash dividends have more opportunity to play a role in protection of interests of minority shareholders. Over-investment and Separation of control from ownership are used to measure the expropriation risk, If a company is in over-investment or has large Separation of control from ownership, this company has high expropriation risk. Market mechanism and legal protection are used to explain why cash dividends do not have enough opportunity to play a full role in protection of interests of minority shareholders. This paper thinks that Cash dividend protection is the product of market mechanism and legal protection and fully effective Cash dividends protection is based on effective market mechanisms and legal protection.Through this study found that:because the effectiveness of China’s market is not high enough and investors are not rational enough, high expropriation risk companies don’t pay higher cash dividends than low expropriation risk companies, but pay lower cash dividends. At the same time, the concentration of corporate control also led to high expropriation risk companies pay lower cash dividends than lower risk companies. It can be inferred that we don’t through the way of high expropriation risk companies paying higher cash dividends to let internal have less opportunities to expropriate the interest of minority shareholders, therefore cash dividend protection mechanisms doesn’t fully play. At the companies of low concentration in the control,cash dividends are more likely to play a role in protection of interests of minority shareholders. At the companies of high degree of concentration in the control,the cash dividend protection is more difficult to play.This paper in one respect proved that because Chinese market and legal protection is poor, It’s difficult for cash Dividend protection mechanisms to be fully used.At the same time, high concentration of control is not conducive to full use of the cash dividend protection mechanisms.