Research On The Influence Of Listed Company's Geographic Location On Dividend Policy

Listed firms reward investors by paying dividends,which has an important impact on future development and financing plans of firms.There is no doubt that dividend policy is important.So,scholars worldwide pay much attention to it for a long time.China's capital market has developed for more than 20 years,however it has a variety of problems comparing with those in developed countries.These problems push more scholars to study the dividend policy of Chinese listed firms.Former studies focus on the characteristics of firms which impact dividend policy,however,they ignore an obvious factor:geographic location.Remotely located firms suffer severer information asymmetry problems and higher regulation costs,which brings about greater agency problems.These problems finally influence firm's dividend policy.Based on above consideration,this paper thinks that it is necessary to take the geographic location of firms into consideration.The initial sample of this paper is all non-financial firms which only issue A stock in Shenzhen and Shanghai Stock Exchanges ranging from 2007 to 2016.The study finds that remotely located firms have lower willingness to distribute dividend and lower distribution level than center firms.This paper also considers the effect of free cash flow and institutional investors.Free cash flow is a factor resulting in agency problems and has significant effect on firms in remote areas.The study finds that the interaction of free cash flow and geographic location has no effect on stock dividend.Nevertheless,the interaction of free cash flow and geographic location lowers the willingness to distribute cash dividend but increases the distribution level of firms in remote areas.In further study,this paper finds that the more share institutional investors hold,the more cash dividend of remote firms pay.What's more,the institutional investors can promote the remotely located firms to distribute cash dividend.However,institutional investors seem to have no impact on stock dividend.This paper not only adds new evidence of the effect of geographic location and governance effect of institutional investors,but also enriches the study of dividend policy.