Institutional Investors On The Impact Of The Cash Dividend Policy

Chinese people have accumulated a lot of wealth during the30years of rapid economic development. There is an urgent need to manage these wealth in order to preserve and appreciate the asset value. The demand for professional investors is also necessary for efficient allocation of these funds in order to promote economic development. Institutional investors, the major wealth management entities, will play an increasingly important role in the capital market.First, as an important component of the capital markets, the stock market has accumulated more and more financing opportunities for listed companies since established. The average annual amount of financing in the stock market has reached more than500billion during the past three years, which really provides precious capital for various enterprises and promotes the development of economy and society.Second, the risk and return of the stock market does not match much. From year2007to2011, the overall return rate of the stock market is estimated only4%, which is less than half of the regular one-year bank deposit receipts. Ordinary investors actually endure much loss.Third, cash dividend will be increasingly appreciated and return to shareholders is ultimately reflected in cash bonus. The return to shareholders must be strengthened for the healthy development the stock marketFinally, institutional investors as an important representative of the investors will play an important role in efficiently allocating capital, promoting the healthy development of the stock market and increasing return for shareholders.Therefore, the author believes that the relationship between the study of institutional investors and cash dividend is a subject worth of study. Since the ultimate source of investing stocks is cash dividend, it is meaningful to analyze how institutional investors affect the dividend policy of the listed companies in order to achieve increasing the value of their investment funds. Investing profitable projects is justified, but if the management simply preserve profits through low interest bank deposits, low-profit projects, other means to transfer profits, they will reduce the value of the company and damage the interests of investors.Empirically we have such conclusions. The bigger proportion of institutional investors, the more probabilities for listed companies to promote cash dividends and care about the interests of investors. Furthermore, we found that there is little link between the proportion of institutional investors and the level of cash dividends, because institutional investors with great research capabilities, support reasonable investment activities and do not require the company to payout as much more dividend as possible. Listed companies with high cash dividend payout ratio can’t be thought as great profitability too.