Catering Theory And Empirical Study On Dividend Policy

Research on the motivation of dividend payout is always one of the focus in academic debate. This paper studies the dividend payout of A stock in Shanghai stock exchange and Shenzhen stock exchange, which emphasizes to check whether there is catering behavior in dividend payout of China’s stock market. This paper considers two ways of dividend payout, one of which is the cash dividend and the other is stock dividend. The regression considers five years in sample, which is made in roll, to predict the probability of dividend payout in the future and to examine the catering theory. The regression results reveal that there isn’t catering behavior if the dividend is paid in cash. What’s more, when considering stock dividend, we can’t find catering behavior in the sense of dividend payout. With the rapid development of sending stocks recently, this paper supports the conclusion that investors prefer to lower price stock in empirical analysis, considering that all investors prefer to choose the stock of lower price irrationally. In addition, this paper firstly adds risk factor to the empirical analysis of dividend payout in China’s stock market. At the same time, we consider the cycle factor. After considering the characteristic variables of risk factor and cycle factor, we find that the low price catering can establish all the same. This paper analyzes in theory and concludes that the probable reason is that the two indexes may not be accurate in China. By checking the catering theory, we conclude that there are two reasons of this phenomenon, one is that investors lack the sense of investment in the long run, they don’t consider too much about the dividend and are interested in short-term investment, which means they have an irrational preference in the price illusion. The other one is that the corporate governance structure is so imperfect that the minority of investors with the outstanding stocks aren’t satisfied with the dividend preference.