Research On The Motivation And Performance Of High Cash Dividends

At present,China's economy is in the process of transformation.Compared with mature capital markets in developed countries,there are some problems,just like asymmetry of information and inefficient operation,in China's capital market.Under the special background of the dual ownership structure in China,the group holding model has become a common phenomenon.Based on this background,the financial behavior of some listed companies is very special,some of them distribute abnormal high cash dividends and the others distribute a small amount of cash dividends.However,the China Securities Regulatory Commission implemented a series of provisions of cash dividends,which solved the problem of distribute a small amount of cash dividends.But there is a lack of restraint on high cash dividends.Studies have shown that the high cash dividends played the role of tunneling interest for the controlling shareholder,which reflects the managers of the company and other stakeholders' interest demands.This behavior will not only affect the interests of small and medium investors,but also the healthy and orderly development of the capital market had a negative impact.At present,China's dividend policy research has three points of myth: the willingness of policymakers to deviate from the small and medium-sized investors,the existence of the controversial dividend level,the insider's behavior.These issues also reflect the game between the firm itself,policy makers,controlling shareholders,small and medium shareholders and other stakeholders.This paper used case study,literature research,event study and comparative study to analyze the abnormal motivation of Ningbo Marine Co.,Ltd.On the conclusion of the paper,I hope to be able to regulate the dividend policy of listed companies,improve the securities market supervision and protect the interest of small and medium investors.This paper first takes the agent theory as the theoretical basis,and points out the hypothesis of free cash flow hypothesis and tunneling hypothesis which reflects the conflicts between investors and managers,controlling shareholders and small and medium shareholders.Based on the present situation of China's capital market,this paper focuses on the tunneling hypothesis,and analyzes the situation of the requirements of institutional investor.The abnormal dividend policy has posted to the market under the influence of the "semi-compulsory dividend policy",the information transmission theory provides the theoretical basis for the market reaction.Ningbo Marine Co.,Ltd.as a company of high cash dividends has two characteristics: a very high frequency of cash dividends and the distribution of cash dividends along with refinancing.After analysis,this paper argues that the motivation of high cash dividends is tunneling behavior of major shareholders,meet the performance requirements of the refinancing stipulated by the CSRC,and meet the dividend requirements of institutional investors.Further research found that the high cash dividends has brought adverse effects on the company's profitability and solvency,which makes the company facing the situation of high financial risk and lack of development potential.From the market reaction,despite the market to the company's mixed dividend to make a positive response,the cumulative abnormal return of cash dividend showed significantly negative.The results have showed that the market effectively identified the purpose of the tunneling behavior of controlling shareholder,and confirmed the market's preferences of dividend.The conclusion of this paper displays that the tunneling behavior of Ningbo Marine Co.,Ltd.is seriously damaged the interests of small and medium shareholders.Therefore,it is necessary to take measures which will protect the interests of small and medium shareholders: Firstly,optimize the voting system of shareholders and improve the status of the small shareholders on major business affairs;secondly,improve the information disclosure system;Thirdly,build class action system,and effectively protect the interests of small and medium shareholders;Fourth,strengthen the management functions of the board of directors,rationally formulate dividend policies.