Study On The Problem Of East China Computer Company's Dividend Allocation And Economic Influences

Dividend payout is a gamble for listed companies to balance between profit distribution and internal reinvestment.It not only concerns the vital interests of shareholders,but also relates to company's long-term development.With the rapid development of China's capital market,the dividend payout of listed companies has received more attention,however,many non-standardized profit distribution phenomena emerges,which seriously harmed the rights and interests of small and medium shareholders and jeopardized the development of China's capital market.Along with more companies starting to distribute cash dividends,the behavior of ultra-ability payouts emerges.Research by Chinese scholars show that the phenomenon of abnormal distribution is a kind of means by which controlling shareholders infringes the interests of small and medium shareholders which makes this industry have realistic significance to research.The expected contribution of this paper is to analyze the essential reasons why they choose different dividend policies and its economic influences,which are helpful for supervision department regulating and minor shareholders protecting their right.This paper adopts the method of normative research method,comparative analysis method and event research method to analyze East China Computer company's dividend allocation.The study finds that since its listing in 1994,the dividend payout of East China Computer has shown a clear four-phase characteristic based on motivations of reputation signaling,capital expanding for risk protection and controlling shareholders transferring interests.East China Computer's dividend policy has three problems.Firstly,the dividend payout lacks continuity and stability;secondly,cash dividend level is too high and underestimates stock dividends;thirdly,ultra-ability cash dividend policy is contrary to industry trends.In order to study the impact of using different dividend policies,this paper analyzes the economic consequences of different dividend policies from three perspectives.From the perspective of market performance,investors are not satisfied with high dividend allocation policy at the initial stage and ultra-ability cash dividend,which brings negative wealth effect to shareholders.From the perspective of corporate value,ultra-ability dividends payout results in a decline in following year's corporate value,and the higher the degree of ultra-distribution,the higher the impact of EVA will be affected in the following year.From the perspective of long-term development,high cash distribution at the beginning and ultra-ability distribution leads to a serious fall of solvency in the following year.High cash distribution does not affect the development capabilities in the initial stage,but ultra-ability distribution can seriously jeopardize the development ability of the next year.The first part of this paper proposes the research background,research significance,research method,research structure and so on.The second part introduces theoretical basis,including the concepts of dividend and ultra-ability cash dividend,factors influences dividend policy and relating theories.The third part analyzes company' dividend payout and motivations of implementing such dividend policy.The fourth part clarifies existed problems of its dividend allocation.The fifth part evaluates the economic consequences from three aspects: market performance,corporate value and long-term development.The last part gives enlightenments and suggestions for companies and regulatory department.