Whether Listed Companies Should Be Forced To Deliver Cash Dividends

This paper discusses whether listed companies should be forced todeliver cash dividends from the perspective of investor protection. It testsmarket reaction using the method of announcement and event study thusto determine whether the Signal Theory or the Dividend Agency CostTheory can better explain cash dividends in China’s capital market. Theannouncement study finds that there is no clear evidence to prove theSignal Theory. The event study discovers that a clear positive responsewill be given to the companies with cash flow problems. So this papersupports the mandatory cash dividend policy.