Research On Bond Market Reaction Of Cash Dividend Change

Cash dividend is an important distribution form.Dividend payments reflect the changes of the companies‘ free cash flow,even involving different investors and shareholders,which will have a profound impact on the long-term development of the company.According to the theoretical research and empirical analysis of foreign literature,abundant studies have proved the impact of cash dividend changes on the effect of bond market,while is almost no domestic research in this area.With the increasing level of cash dividends,and highly concentration of equity structure in China,the contradiction between shareholders and creditors has become prominent.Therefore,based on the perspective of creditor's interests protection,it is significant to study the impact of cash dividend changes on the bond market.Reviewing the literatures about effects of bond markets,which raised by the dividend changes,the author studies A-share listed companies which issued dividend change announcements in Shanghai and Shenzhen Stock Exchanges from 2008 to 2017.It shall be the event day when the dividend distribution plan in the annual report is announced.Event study is used to explore the market reaction of the bond market to the cash dividend announcement.Firstly,the paper observes the reactions of bond prices and trading volumes to cash dividends through the Event Study,and verifies,in Chinese bond market,whether the shareholder wealth transfer effect exits or not.Specifically,the author finds evidence of wealth redistribution around announcements of dividend change: the trading volume will rise but the price will fall,when the cash dividends are increased;When dividends are reduced,investors regard it as a good news at this time.This wealth transfer effect will be alleviated to some extent.The price will increase slightly,and the market excess trading volume will decrease.According to the scale,a further analysis of the market response shows that the size of the dividend will affect the investors in the bond market.The larger the dividend changes,the more obvious the negative impacts on the market.The large increase and decrease of cash dividend will bring in the dropping price significantly and the fluctuated trading volume strongly,therefore the small-scale dividend reduction can alleviate the share transfer effect of shareholders.Based on the performance of the bond market,the econometric model was constructed to analyze the factors that could influence abnormal fluctuation of the bond market under dividends changes.Through group regression analysis,it is found that when dividends increase,equity concentration has a more significant impact on market reaction.The higher the concentration,the less favorable the creditor's interests,and the more negative the negative reaction of the bond market.The internal supervision of the company,the introduction of institutional investors and the improvement of bond credit rating can alleviate the behavior of shareholders to a certain extent.thus alleviating the conflict of interest between bondholders and shareholders,and helping to protect creditors.The phenomenon of shareholder wealth transfer has been alleviated,especially when dividends increase.