Research On The Evaluation System Of Companies’ Cash Dividend Capacity

Dividend distribution has been the core of financial management of listed companies. It is related to the interests of the shareholders of the company and the company’s further development. As one of the forms of dividend, the cash dividend has been the concern of investors, management, and regulatory departments. Dividends of listed companies are of great significance. Cash dividends can improve the income structure of investors, increase the attractiveness of the stock market for long-term funding, and reduce the internal disposable cash flow to curb blind investment and expansion.In order to regulate the dividends of listed companies, regulatory departments introduced a series of corresponding provisions. From2000to2008, the Securities Regulatory Commission has been concerned about the dividends of listed companies, and the dividend requirements are more detailed. In recent years, attributed to these policies, the company’s dividend situation gradually improved, and willingness of paying dividends and the level of dividends have been also improved. Regulatory departments force refinancing combined with the level of cash, reflecting their protection to investors.Does this policy really consider the company’s dividend capacity? The situation of cash dividends has improved. And what are the real reasons? The capacity of the listed companies has been enhanced? Or the regulatory policies have played a role on it? Therefore, it is necessary to research the dividend capacity of the listed companies and then analyze the dividends and dividend capacity of listed companies in China.This paper analyzes three dividend theories, the dividend-signal theory, the life-cycle theory and Pecking-Order theory. Based on the literature about the influencing factors of cash dividends, the factors of cash dividend have been determined. It includes profitability, stability of earnings, available assets, historical growth, investment opportunities, financing capacity of debt, company size and industry factors. To ensure the representativeness of the selected indicators, Non-parametric test and Spearman correlation coefficient have been adopted. AHP (Analytic Hierarchy Process) has been used to determine the weight of each index. Finally the frame-evaluation system of dividend capacity has been built.Then the author illustrates the effectiveness of the evaluation system, analyzes the dividends and dividend capacity of Manufacturing Listed Companies with the evaluation system and obtains many valuable conclusions.The research on the company’s dividend capacity is of great significance:First, there is little research on the company’s dividend capacity. Therefore, this paper shows us a new research direction and enriches the theoretical study.Second, based on the analysis of the factors of the dividend capacity, the evaluation system has been built. This has important implications both for theoretical research and practical operation.At last, this research contributes to the regulatory departments to develop appropriate regulatory policies. The regulatory departments can develop effective regulatory policies after evaluating the capacity of cash dividend.There are still some limitations in sample’s selection and system’s design.The outline of this paper is organized as follow:Chapter I is introduction. This part introduces the research background and significance, the research ideas and research methods, and the research contents and framework.Chapter II is literature review. This part reviews the influencing factors of cash dividends, motivations of cash dividends, and market reaction to cash dividends.Chapter III is theoretical analysis. This part analyzes three dividend theories, the dividend-signal theory, the life-cycle theory and Pecking-Order theory.Chapter IV is construction of Evaluation System. This part is the core of this paper, and concludes the selection of indicators, setting of the index weight, and construction of Evaluation System. Chapter V is the use of the evaluation system. This part illustrates the effectiveness of the evaluation system, analyzes the dividends and dividend capacity of Manufacturing Listed Companies with the evaluation system.Chapter VI is conclusions, recommendations and prospect.