The Analysis On Dividend Policy In Second Board Market Of China Based On The Theory Of Agency Cost

As one of the three important financial behaviors,dividend policy hasalways been the focus of academic research. There are big differences in thefunctions and mechanism set between the Growth Enterprise Market (GEM) andmainboard market.These differences make the dividend policy research of theGEM listed companies has an unique significance. At the same time, theresearch of this paper commences from the angle of agency cost theory,whichwill provide better understandings in both the condition of corporate governanceof our listed companies and the condition of our market’s dividendpolicy,promoting the regulatory effect of our government and the healthydevelopment of the securities market.This paper has analized the applicability of dividend agency theory inChinas GEM market from the normative and the empirical angles.Firstly,thispaper gives a summary and analysis of the dividend distribution status ofChinas GEM listed companies,and makes a dividend policy stutascomparement between the GEM market and the mainland market.There arealmost90%listed companies in GEM distribute cash dividends for threeconsecutive years from year2009to2010,and the cash dividend payout ratioswere37%,36%and38%in the three years.So we can conclude that the GEMlisted companies have the following features:high proportion of cash dividendspayout and high proportion of stock dividend sending preference.Secondly,this paper starts theoretical analysis with the high proportion ofstock dividends sending phenomenon in GEM.The paper argues that the largeproportion of the stock dividends sending of listed companies in GEM is aninevitable consequence of over-raised condition in our capital market and thisprocess does’t harm the interests of small and medium-sized shareholders. Thirdly,this article gives the theoretic alanalysis from the view ofdividendsagency theory and concludes that the “benefit transferring hypothesis” isnotapplicable in Chinas GEM.Finally,we use the data of GEM from year2009to2011as a composition of mixed sample s database,setting variables to measurethe agencycosts,to build a multiple linear regression model. Through empiricalanalysis,we canconfirm the applicability of agency theory in Chinese GEM.Wecan draw theconclusion as follows:low agency costs companies or companieswith good corporategovernance tend to distribute more cash dividends,reducing excess free cash flow ofthe company, in order to further reduce theagency costs of the company and protectshareholders’ interests in a better way.But due to the corporate governance issues of Chinas listed companies,some ofthe listed companies governance mechanisms can not effectively reachthepurpose of reducing the companys agency costs, and thus can not influencethelisted company’dividend policy. This paper also finds that cash dividends oflistedcompanies in GEM has a positive relationship with corporate earnings,firm size andcash flow, and has a negative relationship with financial leverageand future growthrate of the company. What’s more,the proportion of restrictedshares of listedcompany does not have a significant impact on the cashdividend distribution.Therefore, this paper concludes that the distribution ofcash dividends of GEM listedcompanies fully consider the profitability, growthrate and enterprise agency costproblem,corresponding with the free cash flowhypothesis of dividends agencytheory,and the transferring of benefitshypothesis is not applicable in our country.