The Influence Of Fair Value On Cash Dividend Behavior And The Reaction Of Market

In2007, listed companies in our country began to use new accounting standardssystem which is growing to be similar to the International Financial ReportingStandards, and the introduction of fair value has become an important topic which isconcerned by academics and practitioners. Although fair value can improve thereliability and relevance of accounting information, due to fair value has somefeatures like fair, dynamic and estimates that may be affected by personal interestsand eventually become tool of earnings management. The cash dividend is exactly theeconomic consequences of fair value. Whether the change of fair value will result inthe behavior and distribution levels of cash dividend or not, whether corporategovernance will affect the relevance of fair value and cash dividends and whetherinvestors’ reaction to the market under a different fair value of cash dividendannouncements or not, researching in these problems not only has an importanttheoretical significance and is in favor of the design of cash dividends in listedcompanies in the future, but also can improve corporate governance and also hasimportant practical significance in guiding the securities market to develop healthily.Using the theory of accounting objectives, measurement values and net surplustheory, behavioral corporate finance theory, signaling theory, agency theory and thetunnel theory in this paper, we do analysis in the correlation of fair value and theproblems in cash dividend distribution, and research in the effect of changes in fairvalue to the willingness to pay and the level of cash dividends to pay on this basis, aswell as providing a theoretical basis for a more comprehensive understanding of usingfair value in listed companies and the cash dividends.Firstly, we study the influence of changes in fair value to cash dividends of listedcompanies’ willingness to pay and paying levels. We find that the use of fair value hasno correlation with the cash dividend paying willingness, but in the distribution ofcash dividends and changes in fair value of listed companies, the greater gains in thechange of fair value, the higher levels in cash dividends paid, the greater losses in thechange of fair value, the lower levels in cash dividends paid. This can identify thatusers of financial statements cannot be interpreted properly by the relevantinformation, they will be "Functional Locked" in accounting earnings.Secondly, this paper examines the effect of corporate governance on thecorrelation of changes in fair value and cash dividends, through descriptive statistics, correlation analysis and multiple linear regression test, we find that in listedcompanies which changes in fair value is greater than zero, the ownershipconcentration enhance the impact of changes in the fair value gains and cashdividends per share, reflecting the motivation of interests occupation through cashdividend, and with the deepening of the market degree or the improvement ininstitutional environment, the positive impact of changes in fair value gains on cashdividend per share has enhanced; in listed companies which changes in fair value islower than zero, ownership concentration reduces the impact of changes in fair valuegains and cash dividends per share, this can also reflects the interests occupation ofmajor shareholders.Finally, we do analysis in the impact of changes in fair value to cash dividendsby market reaction to the announcement event. The results show that in listedcompanies which changes in the fair value is greater than zero, AAR and CAR aresignificant positive correlation after the dividend announcement day, the stock pricerose; in listed companies which changes in the fair value is lower than zero, AAR andCAR are positive correlation after the dividend announcement day, but notsignificantly, and in the fifth days of dividend announcement day, there is a negativecorrelation between them, and the stock price fell, indicating that investors are unableto identify the proper role of profits in changes of fair value. Based on the above, forthe improvement fair value in cash dividend distribution, we further propose a soundguidelines for measuring fair value and strengthen the role of external supervision,improve the internal governance structure of listed companies、accelerate the processof mercerization and other policy recommendations.