A Study On "High Send And Transfer" Dividend Policy Of Listed Companies And The Behavior Of Selling Shares By Major Shareholders

In our country,the "high send and transfer" dividend policy refers to high ratio of sending stock dividend and transferring capital reserves to common shares.Because its effect is similar to stock dividend and stock splits respectively,it is a common means of dividend policy.With the implementation of the share reform and the lifting of non-tradable shares,the tradable shares expand rapidly in China's securities market.The listed companies prefer to take the "high send and transfer"dividend policy,which is greatly welcome by small investors as a signal of a prosperous prospect.It is true that some listed companies with high growth and good performance want to express the potential prosperous prospect throw the special dividend policy,which brings trading opportunities to investors.But the fact is that stock price of many listed companies taking the "high send and transfer"dividend policy continues to tumble in recent years,leading to small and medium-sized investors have a great loss.So the paper analyzed the motivation of the "high send and transfer" dividend policy and what interest the listed company can get by the special policy.With the implementation of the share reform and the lifting of non-tradable shares,major shareholders are able to sell shares in the secondary market to gain private earnings and therefore the stock price and the interest of major shareholders are more closely connected.As a result,major shareholders try to take actions to affect the share price in the secondary market.In the concentrated ownership structure,it is a common phenomenon that large shareholders have control right to invade the interests of small shareholders for achieving cumulative abnormal returns by insider trading.There are papers confirm that the "high send and transfer" dividend policy can cause severe market reaction and affect liquidity and price of shares,so it is probably leads to tunneling behaviors by major shareholders.This paper examines the probability of reduction and returns of large shareholders holding shares more than 5%in the secondary market based on market reaction to dividend policy,the secondary agency problem,information asymmetry theory,and insider trading theory.Moreover this paper studies the long-term operating performance and market reaction to verify the motivation of "high send and transfer" dividend policy is to transfer interests from minority shareholders to larger shareholders.The paper uses the fiscal year 2006-2014 listed companies on Shanghai and Shenzhen Stock Exchange which publish stock dividends or transfer capital reserves to common shares as total sample and collects data from these listed firms whose large shareholders holding more than 5%have decreased their shares through the call auction system in the secondary market within six month of dividend announcement date as study sample.This article uses multiple regression analysis method to study the probability of selling shares by major shareholders,adopts the method of Wilcoxon nonparametric test to compare the selling price with market average price,then investigates the impact of dividend announcements by utilizing event studies,and selects T parametric test method to test the changes of long-term operating performance and market reaction before and after dividend policy,final divides samples into selling group to further test.The empirical results show that there is strong public reaction to the "high send and transfer" dividend policy in short-term,which brings opportunities for shareholders trading stock in the market.It is also verify listed companies that implement "high send and transfer" dividend policy are more inclined to reduce shares by major shareholders and higher "send and transfer" degree results in higher probability of selling.In addition,the selling price of large shareholders is higher than the average market price.It is the mechanism that major shareholders can use the special dividend policy to gain positively cumulative abnormal returns.However the "high send and transfer" dividend policy is not a signal of future profitability in the long run.This paper indicate that the listed companies' operating performance significantly decreased after implementing the special policy and no positively cumulative abnormal returns,especially the selling group more worse.In conclusion,the paper reveals that the "high send and transfer" dividend policy is the instrument by which larger shareholders expropriate minority shareholders"interests.The innovation of this article lies to study the "high send and transfer"dividend policy specially.Firstly,the paper stretches the frontiers of dividend policy and major shareholders.It focus on the behavior of selling shares and the selling price of large shareholders to reveal the interests mechanism behind of "high send and transfer" dividend policy,while previous literature focused on studying dividend policy and major shareholders' selling behavior separately or the managers' motivation and inverstors' reaction of stock dividend.Secondly,the paper confirms that the "high send and transfer" meet the the interests of large shareholders,and it stretches the study of catering theory.It studies the market timing of major shareholders' selling behavior and analyses changes in he listed companies' operating performance and market reaction to further reaveal the essence of the "high send and transfer" dividend policy controlled by major shareholders.