The Impact Of Stock Market Liberalization On The Corporate Dividends

China's stock market has undergone continuous reform and development since its establishment.Both the governance level of listed companies and the regulatory systems have made great progress.However,compared with mature stock markets,China's stock market has a strong speculative atmosphere.Investors pay more attention to different kinds of "news" rather than the companies' fundamentals.These are undoubtedly related to the lack of awareness of dividends among Chinese listed companies.The phenomenon that Chinese companies attach more importance to financing than to dividend sharing has existed for a long time.In developed stock markets,due to the relatively effective market restraint mechanism and investor legal protection system,listed companies tend to formulate reasonable cash dividend policies based on their profitability and future investment opportunities.Investors share the company's operating results through cash dividends.On the contrary,in China's stock market,many companies are so stingy that they have continuous profits but do not pay dividends,which have damaged investors' rights.Meanwhile,listed companies are keen to pay stock dividends in recent years.The main reasons for this phenomenon are that China's stock market is not yet mature,the governance of listed companies is not advanced,and there is a lack of effective market constraints and investor protection systems.In order to improve the governance of listed companies and safeguard the legitimate interests of shareholders,China has adopted a series of stock market opening policies,among which the most significant one is the connectivity mechanism.Investors from mature overseas stock markets can invest in the mainland stock market,thus conveying value investment concepts through their trading activities.Among them,the Shanghai-Hong Kong Stock Connect is the starting point for the implementation of the interconnection mechanism and has a milestone significance.From the perspective of stock market opening,this paper takes the Shanghai-Hong Kong Stock Connect policy as an exogenous shock to study whether the stock market opening can effectively increase cash dividend and protect the interests of investors.This article first analyzes the advantages and disadvantages of various dividend policies and dividend payment methods,as well as the influence of opening on corporate governance.Then,the article combines the classical dividend theories with the specific situation of stock market opening to theoretically analyze the possible impact of stock market opening on dividend distribution.On this basis,the stock data of the Shanghai Stock Exchange A-share market from 2011 to 2018 are selected,and the Difference-in-Differences model is used to conduct empirical tests.In addition,this article conducts tests grouping test on samples in three dimensions: the nature of the actual controller,company size,and financial leverage.The results show that after the implementation of the Shanghai-Hong Kong Stock Connect,the cash dividends of the target companies have significantly increased compared with non-target companies.Not only has the amount of cash dividends been increased,but the cash dividend payment rate has also increased.This means that foreign shareholders are most likely to be cash seekers whose demand for cash returns has prompted listed companies to increase their willingness and amount of dividend distribution.Further grouping test results show that the opening of the stock market has increased the cash dividend level of listed companies,and this effect is not significantly affected by the nature of the company's actual controller.After the opening of the stock market,the amount of cash dividend payments has increased more in large companies,while the increase of dividend payment rate has been mainly existed in small companies.Regardless of the level of the company's financial leverage,the opening of the stock market has increased the cash dividend payment amount and cash dividend payment rate of listed companies.At the same time,compared with companies with high financial leverage,the cash dividend payment amount of companies with low financial leverage has increased more.Based on the conclusions of empirical research,this article puts forward several policy suggestions.Firstly,China should enhance the protection of investors' interests by raising the level of opening-up.Secondly,while making good use of the governance effects of foreign investors,China should further improve the laws and regulations of the mainland stock market to enhance the protection of investors' interests.Thirdly,while making full use of the funds brought by foreign investors,China should further expand the financing channels of listed companies and lower the threshold for equity refinancing to reduce the financing constraints of listed companies and improve their ability to pay cash dividends.Fourthly,regulators can give foreign investors more tax breaks on dividends and encourage long-term investment through a differentiated tax on dividends.