Research On Dividend Policy Based On Tunneling Of Controlling Shareholders

Dividend policy,as an important financial decision for listed companies,is an important link between the interests of large shareholders and small and medium shareholders and other related parties.Under the corporate governance environment in which China's equity is relatively concentrated,major shareholders and small and medium shareholders have serious agency problems.Therefore,major shareholders will use their control rights to transfer interests.The dividend policy is one of the ways in which controlling shareholders transfer interests.Due to lack of investor protection in China,cash dividends and high transfers in dividend policies have become the main method for controlling shareholders to transfer profits.Many listed companies use earnings management to create an illusion of high profitability,in order to deliver cash to controlling shareholders.At the same time,small and medium investors in the market seem to be keen on various concept stocks,especially high stock splits stocks,which are widely covered by the media.This article takes Er-Kang Pharmaceutical as an example and summarizes characteristics of dividend policy;then from the perspectives of cash dividend distribution and high-send transfer,it analyzed in depth the mechanism of the benefit transfer of controlling shareholders through the dividend policy.In the aspect of cash dividends,first of all,it applies Jones model to measure to what extent earnings management exists in this company.Er-kang Pharmaceutical inflates operating income and net profits through earnings management and related party transactions so as to pave the way for cash dividends;secondly,after the company's private equity placement,a controlling shareholder uses cash dividends to conceal the unusual level of cash distribution.Both indicate that cash dividends gradually become a tool for shareholders to deliver benefits to themselves.In terms of transferring shares,Er-kang Pharmaceutical caters to the irrational speculative demand of small and medium investors through “high stock splits” dividend policy,and generously throw out a high percentage of shares or convert shares.Based on the prior analysis,it elaborates on the impact of the act of benefit transfer caused by the dividend policy on the company.The consequences of earnings management are the sharp drop in the stock price of the company,negative responses in the capital market,and investigation from the Securities Regulatory Commission;After the transfer,continuing reduction in stock held by the controlling shareholder causes further drop in the stock price,and small and medium shareholders are locked in,so this can damage the interests of small and medium shareholders.Finally,conclusions can be drawn from the case study and some suggestions are put forward from four perspectives: listed companies,small and medium-sized investors,regulators and capital market.The dividend policy should truly promote the long-term development of the company and become a way to benefit investors,rather than used as a tool for the controlling shareholders to hollow out listed companies.