The Effect Of Semi-mandatory Dividend Rules On Cash Dividend Of Listed Company

Different from the developed capital market, it is very common that Chinese listed companies never pay the cash dividend or pay at a very low rate. And their dividend policies are also very unstable. Many companies have strong passion to collect money from the market, but they are very stingy when it comes to the dividend problem. The China Securities Regulatory Commision try to solve this problem, from 2001 to now they have released a series of documents which connects the cash dividend with public offerings to improve the status of Chinese listed company dividend.Semi-mandatory dividend policy documents rules the dividend activity of company in different extent. The policy is getting stricter and stricter, this paper separate the time period according the strength of policy, as a result we get the weak supervision period of the policy and the strong supervision period. The most essential difference of the two period is the cash dividend level regulations. During the weak supervision period, the restrain of company is not so strong,because the rules do not tell the detail that how much money should be paid, the key point is pay or not pay. But during the strong supervision period the rules tell the percentage of payment, if the company want to do public offering they should reach the percentage. This paper believe that, in different degree of strength, the company should have different reaction. Two indexes are chosen:the willing of dividend and the level of dividend.The study found that both two periods of the semi-mandatory dividend policy improves the level of cash dividend, but the effect of the strong regulatory period isn’t as good as the weak supervision period. This condition maybe cause by the dividend "threshold" which had a negative incentive to the companies of high cash dividends. From the perspective of debt, after the Semi-mandatory Dividend Rules, the high debt companies decreased the cash payment. But when we use the public offering to represent the effect of the policy, we find some interesting condition,that is some high debt company did pay the cash to achieve the target of capital raising in the weak period: public offering forcing the company with high debt improve their dividend, while during this was not fund in the strong period. The companies which want to rising money through the public way, are the company which keep proper level of dividend. Further analyzing find that thepossible reason is private placement which provide a new choice for the company, so in the strong period the rules play the role of screening. Overall, the semi-mandatory dividend rules do improve the dividend level of the whole market, but with the rules get stricter, the effect do not get better.