"high Sends Turn" Signal Transmission Effect Of Dividend Distribution Policy

Stock dividend policies are always concerned by the investors. In western developed capital markets, most scholars agree on the opinion that the dividend policies act as the signals, which transmit the listed company’s information to the investors, and represent the corporate management’s expectations of future returns. However, for the Chinese stock market, the argument on whether the stock dividends could be regarded as a signal of the market or it’s just an accounting game has never stopped. Especially given the facts of the underdeveloped Chinese stock market, the short trading history, the highly concentrated ownership structure, deficient regulations and the high correlation between government policies and the market, It’s still uncertain whether the dividend policies could be treated as a signal to the market.This paper tries to analyze the signal effect of dividend policies based on former studies. We use empirical analysis and theoretical research methodology to verify the wealth effect of high dividend policies from the perspective of investors, and check whether the high dividend policies are based on the current financial status of the listed company and whether the profit increase could be sustained.Compared with previous researches, our paper has innovations of analysis orientation and methods. First of all, in most previous studies, the analyses are always focus on cash dividends or mixed dividends. There are very few researches focused on stock dividends. Secondly, most researches consider only the short term period and reach the conclusion that the high-turns stocks have high extra returns in the short-run. But they ignore checking midterm and long-term performances. Thirdly, the event study has inborn defects, so we also check the financial data instead of trading data to make our conclusion more credible.Based on our empirical analysis, we reach the conclusion that the extra returns of high-turns are only significant positive in short-term period. It’s quite surprising that the extra returns of high-turns in the mid-term period are significant negative, but not quite significant for long-term period. This conclusion indicates that the high-turns stocks are only the accounting games that help the big investors to exploit the other investors. Based on sustainable growth theory, we discover that the stock dividend policies deviate from sustainable development of corporations. The dividend policies of the listed company should base on sustainable needs, but the results of empirical research show that there is no correlation between stock dividends and cash demands of corporations. It also suggests that the stock dividend policies have nothing to do with the growth of ROA. After analyzing the financial index, we could make a credible conclusion that the stock dividend policies could not be treated as a signal of the Chinese stock market, and the high dividend policy is only an accounting game and speculation.