Study Of Cash Dividend And Investment Behavior

For enterprises, investment decision is the main source of value creation, however, the results ofinvestment decision—makings are not always reflected in the maximization of corporate value, specially,the managements will make some investment decisions that beneficial to their own interests but harmful toenterprises, when corporate have a large number of free cash flows. They will accept some investmentopportunities that the net present value is less than zero, and then it is resulting in the so-called“over-investment’’ problem, it will damage the value of the company seriously, and hinder the growing ofcorporate. The abroad studies show that cash dividends have the function to reduce the agency cost andrelief over-investment. However, the study of cash dividends and over-investment is much more in China,and the conclusions are not uniformly. As a result, in order to better understand whether the cash dividendshave the function to relief over-investment effectively, this paper focused on the over-investment problemsof companies in the view of cash dividends. No result of this study will provide theory bases for utilizedividend policy rationally and instituting relative investment strategies and suggestions scientifically inlisted companies in China.As a weak legal environment country under transition economy, China has its own unique systembackground. Macro-speaking, uneven development between provincial and municipal, the eastern coastalareas is higher than the western inland areas of the market process. In areas with a high degree ofmarket-oriented, usually have a higher level of the legal system, the elements of the level of developmentof the market as well as the level of economic development. Existing studies have shown that, thecompanies will make different financial decision-making behavior in different degree of market areas.From the microscopic point of view, the equity structure of listed companies is relatively concentrated, andmostly controlled by the government. As the controlling shareholder holds control rights, self-servingnature and opportunistic behavior tends to encourage them to grab private benefits of control, thus makeprejudicial to the interests of minority shareholders of non-efficiency of financial decision-making behavior.Therefore, based on our unique system of background, Select the cash dividend policy as a starting point,test their effect on the governance of excessive investment behavior is very important.In this paper, based on our special institutional background, finishing the study of people, in theoryanalysis how the cash dividend policy curb excessive investment behavior. Select2006--2010, theShanghai and Shenzhen Stock Exchange A-share listed companies as the initial study sample, by inhibitingexcessive investment behavior, empirical research the cash dividend policy affects the value of the business.The results show that the policies of cash dividend curb excessive investment behavior. The nature of thecontrolling shareholder of the government and the degree of separation of ownership’s improving weakenthe governance effect of this cash dividend policy, The process of promoting market-oriented strengthenthe rationale effect of cash dividend policy. At the same time, by improving the over-investment behavior,studies have shown that cash dividend policy can improve the business’ value. This study is a supplementto the findings of the cash dividend policy and corporate performance. There is a certain reference value. Inorder to understand the effectiveness of cash dividends of listed companies in China and practical designcash dividends.