An Empirical Research Of Interests Protection Of Medium And Small Investors In Cash Dividends Allocation

The capital gains from price differences by stock buying and selling and the dividends distributed by listed companies have been the primary gains that the medium and small investors can attain by investing in securities markets. The stock price of China’s stock markets has fluctuations, which makes it tough to acquire capital gains for medium and small investors. Moreover, so many listed companies in China are unwilling to allocate cash dividends so that the following problems found in listed companies in China are obvious including no-allocation and small-scale allocation of cash dividends. Still, the controlling shareholders in the listed companies in china have embezzled company capital, committed related transactions and provided fake financial statement, all of which will negatively influence and cannot guarantee the interests of medium and small investors. So, China Securities Regulatory Commission(CSRC) has started to put forward more serious requirements on the allocation forms and scales of listed companies before their re-financing in the year of 2001. CSRC has hoped the medium and small investors can benefit from mandatory dividend policies. Based on the protection of interests of medium and small investors, this essay has chosen the allocation of cash dividends as beginning and then explored whether it has the protection function of the interests of medium and small investors.This essay has based on the reviews of related documents in and out of China, then started to explore the influence from cash dividends allocation on interests protection of medium and small investors, and stated t cash dividends theory, the protection theory of medium and small investors and the relationship between allocation of cash dividends and the interests protection of medium and small investors. Furthermore, this essay has analyzed the current situation of interests protection of medium and small investors and of cash dividends allocation of listed manufacture companies in China. Then, this essay has referred to assessment indicator system of interests protection of medium and small investors built on the assessment indicator system of interests protection of investors claimed by some scholars, and has tried to use questionnaire survey method to determine every index weight. Also this essay has used empirical data(2007-2011) of listed manufacture companies of Shanghai and Shenzhen A shares, brought the two definitions of allocation rates of cash dividends into a model, and empirically analyzed the influence from cash dividends allocation on the interests protection of medium and small investors. The conclusion is as follows. Firstly, cash dividends allocation is beneficial to the interests protection of medium and small investors. And there is a direct proportion relationship between cash dividends allocation and interests protection of medium and small investors. Secondly, the companies characterized by scattered stock rights have more influence on protection of medium and small investors in the cash dividends allocation than those characterized by concentrated stock rights. Thirdly, the protection of medium and small investors will be strengthened following the improvement of cash dividends allocation but the protection of medium and small investors will be relieved with the improvement of cash dividends allocation when the later has reached some certain point just like U shape. On the theoretical and empirical analyses, this essay has provided several solutions to strengthen the interests protection of medium and small investors. As for government and supervision organizations, it is meaningful to separate cash dividends allocation from re-financing, put forward mandatory polices of cash dividends allocation, strengthen the audit management of listed companies, and punish illegal behaviors heavily. Also it is very useful to establish specialized agency to protect the interests of medium and small investors, quicken the completion of laws building. As for listed companies, it is important to formulate positive cash dividends polices, and put more efforts in the law enforcement and cultivate the responsibility of listed company of reciprocating investors. As for medium and small investors, it is advisable to enhance the awareness of self-protection, and emphasize the cash dividends allocation of listed companies.