Research Of Stability Mechanism Between Cash Dividends And Share Price

From the20years development of China’s securities market, the volatility of stock price has been always plagued China’s stock market. Cash dividend, as endogenous price stabilization mechanism, plays a critical role to share price stabilization and promote the healthy operation of the capital market. This article from the perspective of cash dividends, analyzes the price stable path between cash dividends and stock price stable path, and through empirical studies validates stable relationship between these two factors. After preliminary descriptive statistics of the data, this article respectively uses fixed effects model and Fama and MacBeth (1973) two-step regression method, as well as single-factor analysis and co-integration test, and ultimately gets the following empirical results:(1) By the analysis of cash dividends subgroup of listed companies from2002to2012, this article has confirmed that consecutive cash dividend has a significant impact on the volatility of stock price. Among these listed companies, those with consecutive cash dividends up to10-11years significantly have more stable stock price than those with consecutive cash dividends less than3times.(2) From the results of Panel data model results, that if listed companies provide cash dividends as well as cash dividend levels can impact the volatility of stock price. Particularly, if listed companies provide cash dividends, they can get stable stock prices, while the level of cash dividends is negatively correlated with volatility, but the effect is not significant. In addition, the findings of book market ratio, leverage ratio are consistent with the theory. Thus, according to the panel data regression results, this paper considers that whether listed companies provide cash dividends determines the fluctuations of stock price, and the relation between the level of cash dividends and stock price fluctuations is not significant.(3) With the data2006-2012, univariate study between cash dividends and volatility of stock price under different market cycles has confirmed that in different cycles of the stock market, cash dividend and stock price volatility are significantly negatively correlated, and in the fall market period, cash dividend has a greater impact on the share price fluctuations at the10%significance level. Thus, according to Fama and MacBeth (1973) regression results, this paper considers that under different market cycles, the impact between cash dividends and stock price fluctuations is different. Especially under down market period, cash dividend plays a greater role.With the help of theoretical and empirical studies, this paper gets the following recommendations:(1) In improving the internal mechanism of listed companies, we should improve internal governance mechanism, and strengthen supervision of cash dividends of listed companies.(2) In perfecting semi-compulsory dividend policy, we can try to link up with the stock price, and use differentiated cash dividend rate, as well as develop continuity and stability standards of cash dividend.(3)To strengthen macro-environment market, we should perfect the macroeconomic environment of value investment, and accelerate the construction of the interest rate liberalization.