Stock Dividends And Stock Price Crash Risk

Stock dividends often bring significant market performance for listed companies.In addition,the prior research has found that stock dividends may have the role of signal transfer,but there may also be agency problems behind the stock dividends.Both of these aspects are closely related to the stock price crash risk.Therefore,it is particularly necessary to study the impact of stock dividends on stock price crash risk.Taking the Shanghai and Shenzhen A-share listed companies from 2008 to 2018 as a sample,this paper examines how stock dividends affect stock price crash risk.It finds that stock dividends generally mitigate stock price crash risk.However,based on the sub-sample test,it is heterogeneous for the effect of stock dividends on the stock price crash risk.Because these companies have weaker motives for profit by stock dividends,this negative relation is more pronounced in state-controlled listed companies and listed companies that their large shareholders have not reduced the shareholdings.In the sub-sample of non-state-controlled listed companies,the inhibition effect of stock dividends on stock price crash risk has weakened.In the sub-sample of listed companies with large shareholder reducing the shareholdings,stock dividends no longer significantly reduce stock price crash risk.This paper also examines the channels through which stock dividends mitigate stock price crash risk.First of all,in terms of liquidity channel,stock dividends can indeed improve stock liquidity,but the improvement of stock liquidity will increase future stock price crash risk.In other words,the inhibition effect is not through liquidity channel.Secondly,in terms of signal transfer channel,the inhibition effect of stock dividends on future stock price crash risk is more significant for firms with higher opacity and lower marketization environment.Stock dividends do play a role through signal transfer channel.For listed companies with a high degree of information asymmetry,the stock dividends will indeed significantly reduce future stock price crash risk.Finally,in further analysis,it finds that more stock dividends attract more analyst attention.However,more analyst attention brings higher stock price crash risk.The signal transfer function of stock dividends is not caused by the “eyeball effect”.In addition,after controlling cash dividends level,stock dividends still have the function of signal transfer,which will reduce stock price crash risk.However,the signal transfer effect is affected by the level of cash dividends and is only significant among listed companies with relatively low levels of cash dividends.The relationship between stock dividends and stock price crash risk may be endogenous because listed companies with lower stock price crash risk may choose to issue more stock dividends.In order to make the results more reliable,this paper uses propensity score matching method and instrumental variable method for endogeneity test,and finds that stock dividends still significantly mitigate stock price crash risk.In addition,this paper also carries out other robustness tests.The results are still robust and are not affected by the measurement of stock dividends and the addition and replacement of some control variables.According to the relevant conclusions,some policy recommendations are proposed.Firstly,do not excessively intervene the dividend policy of listed companies.Secondly,formulate differentiated conditions for listed companies to issue stock dividends.Thirdly,encourage listed companies to offer optional dividends.Finally,strengthen policy supervision and improve institutional building.