A Study Of The Influence Of Product Market Competition On Listed Companies' Cash Dividend Policy

Raising capital,investing and distributing profits are the three main financing activities of firms,and the allocation of dividends has always been the focus in the field of financial management.In modern incorporated enterprises where ownership and the right of management is separated,on the one hand,professional managers improve the company's operational efficiency with their talent;but on the other hand,due to the "hypothesis of economic man",the objective of managers may differ from that of the company owner's.In addition,compared with the outside shareholders,managers often know more about the status of company,which encourage and enable managers to do things that damage shareholders' benefits,resulting in low shareholder value.Existing literature on factors that influence cash dividends mostly focus on internal ones:such as a firm's financial traits,corporate governance and so on,but scholars rarely pay attention to outside environment companies live in,say,law environment and product market environment.Actually,as an important external governance mechanism,product market competition can effectively mitigate agency problems originated in separation of ownership and management,because fierce product market competition can monitor and encourage managers and can increase transparency of information.In the last decades,scholars at home and abroad start putting emphasis on the role of product market competition,and combing this industrial economy concept with financing,and has drawn helpful conclusions.However,domestic scholars rarely study the implications of product market competition for dividend policy directly,and to the best of our knowledge,several papers haven't come to an agreement.This provides motivation for our study.China's capital market is still immature,and a majority of listed companies value fund-raising whiling paying shareholders little.Would product market competition affect dividend payments in our country?If so,which path explains its impact?This paper aims to answer theses two questions.In this paper,we adopt normative research as well as empirical research method.Firstly,on the basis of literature on principal-agent theory and asymmetric information theory,we develop two hypotheses.Secondly,we select companies in A share market that have ever paid cash dividend from 2010 to 2014 as our sample.We then make descriptive analysis,independent sample T-test,correlation analysis,multiple linear regression analysis and finally mediation test to support our hypotheses.Through empirical research,we draw conclusions as follows:First of all,fierce product market competition can help increases cash dividend payments.Secondly,we find negative relationship between managers' perquisite consumption and product market competition.That is to say,product market competition affects cash dividend payment through mitigating manager'' perquisite consumption.Our conclusions show that,at present in our country,product market competition,as an external corporate governance mechanism,works to some extent in terms of restraining managers' self-serving behaviors,and thereby mitigating agent conflicts between principals and agents caused by asymmetric information.Based on the conclusions above,we put forward several proposals:(1)Further implement the structural reform of the economy,encourage fair and reasonable competition of the market.(2)Relevant departments should take industrial factors into consideration to concretely guide and regulate listed companies' cash dividend decisions.(3)Reinforce the supervision of companies to control managers'perquisite consumption,accordingly protect shareholders' benefits.