An Analysis Of Cash Dividend Behaviors Of Chinese Listed Firms Based On The Semi-mandatory Dividend Policy

The level of cash dividend paying in Chinese capital market continuously fell from the 1990s. The phenomenon of listed firm setting low even zero cash dividend policy is very common. Chinese SEC has enacted six files about cash dividend policy of listed firms from 2001 to 2013, which are defined "Semi-mandatory Dividend Policy" by academia. The major objective of the policy is to enhance the listed firms’willing to pay out cash dividend and improve the level of ratio of cash dividend to net profit. Besides, the Semi-mandatory Dividend Policy is supposed to strengthen the protection to retail investors. Different from the "mandatory Dividend Policy" of other Emerging market countries, the Semi-mandatory Dividend Policy does not stipulate the specific ratio of cash dividend to net profit. The policy relates the level of cash dividend policy to listed firms’refinancing qualification, which means if the firm wants to refinance in the capital market, it has to meet the cash dividend requirement of Chinese SEC. The policy has triggered controversy in the implementation process. On the one hand, the level of cash dividend paying in the whole capital market indeed has risen after the policy implemented. More and more listed firms begin to pay out cash dividend. On the other hand, for the firms which are in the huge need of refinancing or are poor in cash flow, the policy just acts like "snow plus frost". And the policy cannot exert effective regulation to the firms which don’t have the demand to refinance or are adequate in cash flow. In a word, the Semi-mandatory Dividend Policy makes the firms which are not suitable or don’t have the ability improve the level of paying out cash dividend, which causes a supervision paradox.The empirical analysis consists of two contents, and the first one is testing the effect of the Semi-mandatory Dividend Policy on the capital market. The second one is analyzing the influence of the policy on the relationship between the listed firm’s characteristics or the industry characteristics and the level of its cash dividend paying. The dissertation selects the firms listed on the Shanghai or Shenzhen stock exchange before 2013 as sample. And the analyzing year interval varies from 1991 to 2013. For building panel data model, design the willing of paying cash dividend and the ratio of cash dividend to net profit separately as the dependent variable and the policy variable as the independent variables with listed firms’ characteristics and the industry characteristics as controlling variables. According to the result of empirical analysis, the Semi-mandatory Dividend Policy indeed contributes to improve the level of cash dividend paying in capital market, but the different stage of the policy conducts different influence on the listed firms. The policy changes the relationship between profitability or asset-liability ratio or growth and the cash dividend paying significantly. Under the background of the Semi-mandatory Dividend Policy, if the firm has poorer profitability or high asset-liability ratio or high growth, it is more likely to pay out cash dividend on the high level. This phenomenon is much more apparent after the year 2006.But the policy has no influence on the relationship between ownership concentration or industry characteristics and behavior of cash dividend paying.