Legitimacy And Boundary Of Listed Company’s Mandatory Dividend

Cash dividend is an important part of the listed company’s dividend policies，andalways is one of the most important means to interest investors. When theenvironment of cash dividend is being worsening，CSRC issued series of policies toregulate the cash dividend one after another for the purpose of keeping the mediumand small investors’ equity safe. These policies are issued and refining constantly，andtake compelling forces to the bad current situation of cash dividend. Thegovernment’s compelling intervene has the complete legitimacy. However，there arenatural conflict between government’s compelling intervene and company autonomy，so the topic of this paper will focus on what is the boundary of government’scompelling intervene and how to keep the regulation and market going well together.Chapter I mainly discusses the background of the mandatory dividend，which isthe CSRC’s regulation history to cash dividend and its information disclosure for thepurpose to keep the medium and small investors’ equity safer. Firstly，introduce theconcepts of the mandatory dividend and voluntary dividend. Secondly，summarize thehistory of cash dividend policies to acknowledge China’s cash dividend policiesoverall. The last but not the least，this paper analyzes some reasons between thepolicies.Chapter II mainly discusses the legitimacy of government’s mandatory dividendwith the theory and demonstration methods. One of the theories is AsymmetricInformation theory，it focuses on the problems of business judgment dissimilationresulted from the unreasonable ownership structure situation in China. While the Public Choice theory is focusing on explaining how the large shareholders use theircontrol power to harm others to benefit themselves under the Economic PersonAssumption. The Free Rider theory mainly focuses on explaining why the largeshareholders intend to exploit the medium and small shareholders’ rights and whatmethods the large shareholders take to grab their illegitimate benefit. Agency Costtheory mainly tries to reveal that it’s dangers when managers have controlled largenumber of cash，so when there is no any initiative cash dividends，government’smandatory dividend deserves its legitimacy. For the demonstration methods，the papertries to collect and analyze the relevant data from2003to2012，to find out thedifferent kinds of cash dividend policies and the scales and to discuss the practicalsignificance of mandatory dividend remedying the market’s defects.Chapter III mainly discusses the matter of mandatory dividend boundary. Thispaper mainly discusses what boundary and limitation of mandatory dividend are. Wewill discuss them through3aspects：the failure of government’s control，courts’conservative judgment to the cash dividend disputes based on business judgment rule，free and efficient rule in market economy. Government can follow encouraging andguided methods to intervene the cash dividend avoiding sweeping uniformity in allcases. Court should take cautious attitude when deal with dividend disputes，evenmore strict when use the business judgment rule. Efficiency and freedom is the goldenrule in market economy，small government and big society keeps the stock market’srationality.Chapter IV，the last chapter，mainly discusses the current situation and tendencyof mandatory dividend policy. Three conclusions are illustrated the development andapplication situation in USA，Hong Kong and Taiwan respectively. What we shoulddo are gathering corporate internal governance， government regulation， legalprotection and other matching measures in society，and optimizing them. At the end，this paper will describe the future and tendency of mandatory dividend policy. In thelong run，cash dividend will go down，but it’s true that the free system environmentwill not be built unless we have a mature capital market and reasonable ownershipstructure.