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Research On Dividend Signaling Of China’s Listed Companies

Posted on:2017-04-14Degree:MasterType:Thesis
Country:ChinaCandidate:X Y LiangFull Text:PDF
GTID:2309330503966592Subject:economics
Abstract/Summary:PDF Full Text Request
Dividend signaling hypothesis argues that, under asymmetric information, managers can use dividends to convey inside information to outside investors. If a company pays high and stable dividends, investors can expect it have a good prospect. Most western literature focuses on the signal of cash dividends. But China’s listed companies tend to pay low cash dividends while carry out large ratio of stock dividends or stock splits, which is quite different from that of western companies. Research in China thus analyzes the signal of stock dividends and stock splits as well. Prior empirical study usually tests in dimension of market reaction or future earnings change. The dimension of earnings quality recently raises attention.This paper, in Chinese context, analyzes the signal effect of cash dividends, stock dividends and stock splits of listed companies. This paper also empirically test hypothesis in dimension of future earnings change and earnings quality. This paper provides a probably new research perspective, and can help to explain China’s dividend puzzle.In theory, cash dividends have strong signal effect, while stock dividends and stock splits have weak signal effect. But in China’s capital market, due to large shareholder controlling, imperfect capital market and government regulation, cash dividends may become to have weak signal effect, while stock dividends and stock splits may, in some degree, have substitution effect of cash dividends.Empirical results support the hypothesis. The cash dividends, stock dividends and stock splits of China’s listed companies all have weak signal effect, and convey different information. To be specific, cash dividends do not signal future earnings change, but signal earnings quality. Stock dividends and stock splits signal near future earnings change, but do not signal farther future earnings change or earnings quality. Compound dividends convey no more information.
Keywords/Search Tags:Dividend Policy, Signaling, Cash Dividend, Stock Dividend, Stock Split
PDF Full Text Request
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