Research On The Impact Of Cash Dividends To Over-Investment

Investment is an important motivation of enterprises to create value.Although the investment decisions are usually based on the goal of maximizing the value of the enterprise,when the managers of enterprises make the investment decisions,enterprise managers in making investment decisions,may still be out of view to maximize their own interests to consider a lower rate of return even investment opportunities with negative yields,resulting in excessive investment behavior.Meanwhile the consequences of investment decisions not only limit the development of the enterprises,but also influence the goal of the enterprise to maximize profit.Besides the investment decisions,dividend policy and financing decision are also important financial decisions.For a long time,domestic and foreign scholars have carried out extensive and thorough researches on the three activities,but the researches are relatively independent.The paper analyzes the relationship between cash dividend policy and overinvestment through equity refinancing demand relationship.Nowadays the researchers have found that Chinese listed companies'prevalence of over-investment behavior,and the cash dividend policy as an effective governance mechanism,can effectively reduce agency costs,ease overinvestment by corporate recognition.Different from the western listed companies,Chinese listed companies prefer equity refinancing,and make stable dividend policy.Based on the basic national conditions of our country and regulation policy of equity refinancing need the article analyzes the influence of cash dividend to over-investment.Regulatory policy is intended to improve situation of low financing efficiency and low return.But in view of China's special national conditions,cash dividends have a dual nature on the over-investment management function.On the one hand,cash dividends can reduce the free cash flows,inhibiting the excessive investment behavior of the management.On the other hand,cash dividends could be utilized to meet the requirements for refinancing,which ultimately weakens the inhibitory effect and against the purpose of regulation policy of equity refinancing need.In this case,this paper attempts to test the effect of equity refinancing need.We use the data of listed companies in Shanghai and Shengzhen A-share between 2010 and 2015 to study the effect of cash dividend to over-investment.Controlling of the growth opportunities,debt scale,company size,ownership balancing degree,Big Shareholders related variables,we do the main variables descriptive analysis,correlation analysis,regression analysis.At the same time,all companies would be divided into two groups to compared,one has raised capital through equity refinancing(SEO group)and one has not(NSEO group).Through the above research,this paper draws the following two conclusions.The results showed that cash dividends of listed companies in our country could inhibit the excessive investment behavior.Compared with NSEO group,cash dividend policy in SEO group weaken the management of excessive investment behavior.The regulatory policy has certain positive influence to our listed company.Finally,according to the empirical results,many reasonable suggestions are made in order to curb the over-investment behavior.