Research On Abnormal Dividend Distribution And Value Plunder Under Performance Compensation Commitment

Under the protection of major asset restructuring transactions,in order to protect the interests of small and medium-sized shareholders and investors China Securities Regulatory Commission in the "Regulations on the Management of Major Asset Restructuring of Listed Companies" in 2008 stipulated that if listed companies purchase assets,they shall report on the prospective profitability of the assets to be purchased(otherwise the entire entity after the acquisition.the parties involved in the transaction shall sign clear and feasible compensation agreements with the listed company with regard that the actual profit of the relevant assets(or listed companies)turn out to be less than the forecasted profit.This specification aims to restrict the sale of assets and protect the loss of equity caused by the information asymmetry encountered by small &medium shareholders and investors.However,the regulations did not further restrict the way the major shareholders of listed companies shall conduct the performance compensation.When the profit promise made by the major shareholders couldn't be satisfied,the major shareholders have the incentive to void the compensation responsibilities through various channels in which interests of minor shareholders are sacrificed.Similar to the signal effect that listed companies issue performance compensation promises,listed companies' “high distribution,high delivery” dividend policies are often interpreted by investors as a positive signal from the listed companies.However,the major shareholder of *ST Haeron which this article is based on used the cash income of the manipulated dividend policy as the source of funds for performance compensation at the expense of the future operating ability of the listed company.Such behavior caused severe infringement to the rights of the minor shareholders..When a major mismatch emerged between the company's actual performance and its performance commitments,the major shareholders lost confidence in the company's future operating results,and used its own advantages in information and control to declare “high transfer” dividend policies to release so-called “positive news” to push up the stock price of the company,and then cut their shares holdings at the high position,causing double damage to minor shareholders and investors.Through the analysis of the case,it is concluded that the major shareholder violates the original intention of the China Securities Regulatory Commission to formulate a major shareholder performance compensation commitment by affecting the dividend compensation policy of the listed company,and the performance compensation commitment instead provide impetus to the major shareholders to seek to plunge the minor shareholders of the value of the large shareholder.Subsequent continuous abnormal dividend policies have caused great infringement on the rights of minor shareholders and investors,and exposed huge loopholes within the performance compensation system,dividend distribution policy,and corporate governance of listed companies which is worth paying close attention of minor investors and regulators.From the perspective of the major shareholder's implementation of the funding source for the performance pledge,this article conducts an in-depth analysis of the abnormal dividend policy of *ST Hareon,discusses the additional infringements caused by the rights and interests of small and medium shareholders,and inspires the investors and supervisory departments of minor shareholders.