The Relation Between Cash Dividend Distribution And The Stock Market Performance Of A-share Listed Companies

The paper analyzed and did empirical study on the relation between cash dividend and the performance of stock of listed company in the primary market(the discount of the private placement)and the secondary market(the stability of the stock price).We suggested that the major way cash dividend affected the stock performance of listed company was through its composition of investors and the trading style of investors.The companies which delivered large amount of cash dividend would attract those investors who pay much attention to cash dividend income,and made them willing to hold the stock of the companies for the long term.In the private placement market,due to the regulation of lockup period,the participants of the private placements tend to be long-term investors who are usually more rational while making decisions.Such kind of investors' decision about the listed companies would depend on their return on investment(reflected in the dividend yield)and the long-term growth of the companies(which was negatively correlated with the dividend payout ratio).Hence,the increase in the cash dividend of listed companies would have both positive and negative effect on the investors' willingness to invest in the private placements,and thus affect the private placement discount in two different directions.The empirical study also indicated the existence of the two directions of influences.Further study suggested that under the comprehensive effect of the two directions of influences,the increase in the amount of cash dividends distributed would decrease the private placement discount,and help enhance the financing efficiency of the company.In the secondary market,the paper suggested that the cash dividend policy will to some extent determine the kind of investors that the listed company attracted.The companies with large amount of cash dividend and high dividend yield will be more welcomed by the investors who are willing to discover the companies' intrinsic value and keep the stock of the company for long.The investors' value-oriented and long-term pattern of investment would help enhance the stability of the stock price of listed companies in the secondary market,which was also supported by the result of empirical studies in this paper.