Influence Of Managerial Entrenchment’ Compensation Incentive On Cash Dividend Tendency And Level

Recently, the senior executives’ payments are increasing remarkably while theselisted companies have not implemented dividend policy. As the core decision makers,these senior executives are really playing a significant role in listed companies’ dividendpolicy formulation. The managerial entrenchment behaviour refers to the management’stendency to choose the most favorable decisions on their own under the supervision ofthe corporation’s internal and external mechanisms. It gives rise to the principal-agentproblem, which causes the conflict of interest between managers and shareholdersbecause of the asymmetric information, and it prevents the accomplishment ofshareholder value maximization. The cash dividend policy is an important financialpolicy for most quoted corporations, and the managers’ attitude to the cash dividendpolicy reflects the shareholders’ demand and willingness. Meanwhile, the implementedcompensation incentive strategy to listed companies’ senior executives aims atstimulating them to enhance the performance of companies, which can reinforce cashdividends and reduce the agent costs. Therefore, this paper studied the influence ofmanagerial entrenchment behaviour, compensation incentive on listed corporations’ cashdividend tendency and level.This thesis studied the listed companies’ dividend policy, combined with thenormative research and empirical analysis. At first, based on the definition of managerialentrenchment and executive compensation, the former literatures of the influence ofmanagerial entrenchment, compensation incentive on the dividend policy were reviewedand summarized. Then the correlative theories were appraised. In the empirical part, thispaper chose the companies which has been quoted in2008as our study sample, andchose year2009to year2011as our event period, then we got913enterprises whichcompletely meet our standard. With the descriptive statistics analysis, Pearsoncorrelation analysis and empirical regression, we eventually came to the conclusion that: (1) Senior executives’ average age has a positive correlation relationship with listedcompanies’ cash dividend tendency and level;(2) Senior executives’ average tenure hasan extremely positive correlation relationship with listed companies’ cash dividendtendency and level;(3) Ownership concentration has an exceedingly negative effect onlisted companies’ cash dividend tendency, whilst it has a relatively weak effect on listedcompanies’ cash dividend level, which is not remarkable;(4) The asset turnover ratioindex has a prominent effect on quoted companies’ cash divided tendency, while itsrelationship with cash dividend level shows no any remarkable sign;(5) Executivecompensation shows a highly affirmative effect both on listed companies’ cash dividendtendency and its level. Finally, this thesis proposed effective countermeasures to governour listed corporations’ abnormal cash dividend phenomenon.This thesis’s theoretical interpretation and empirical analysis of the effect ofmanagerial entrenchment, executive compensation on listed companies’ cash dividendpolicy have a significant conductive meaning on regularizing our countries’ quotedcorporations’ cash dividend distribution behaviour. Meanwhile, it also provides effectivesuggestions to help our governments solve the abnormal cash dividend distributionphenomenon.