A Study On The Motivation And Economic Consequences Of Listed Companies’ High Cash Payment

Dividend distribution is to distribute the company’s net profit of one year to owners,including retention in the company or distribution to investors.The former is for the company to have sufficient funds for investment;the latter is what the company gives to its shareholders.The company will weigh the ratio of the two according to the situation,which reflects different dividend distribution concepts and has an incredibly profound and deep-going influence on the company.A reasonable dividend distribution policy,for one thing,is beneficial to the company’s long-time evolution,because it conveys information about the company’s future development to the market,enhances the company’s credibility,helps to show the company in a good light,pull new investors,and obtain more financing;for another it also helps to improve the company’s governance structure,reduce cost of capital,and enhance company value.However,some companies have abnormal cash distribution,and the amount of cash distributed exceeds the company’s own gain and state of cash flow,which hinders the company’s growth in the future.Therefore,it is always an essential issue to considerate the dividend policy for listed companies in the financial management to make this kind of decision.How many dividends are reasonable to distribute,what prerequisites are needed to distribute high cash dividends,and what impact will it bring to the company?These are issues worth considering for company managers.In recent years,the number of cash-dividend-distributing public companies in our country has multiplied.They have attained about 70% of the total in the A-share market.However,the average dividend per share is low and the overall distribution level is not high.On this basis,this article selects Fuyao Glass,which is classified as auto parts by Wind,as the subject,and uses case studies,literature studies and comparative studies to analyze the main factors that can continue to implement the high dividend policy for many years and study the financial effects,corporate value and market response of this kind of dividend policy to the enterprise.The thesis is expected to better guide companies to make effective cash dividend policies,and arouse meaningful discussions on improving the company’s financing structure and equity structure,and promoting the efficacy of the company’s utilization of its capital through the analysis of Fuyao Glass’ s high cash dividend case.First of all,this thesis reviews previous researches on theories of dividend distribution policy,factors that influences it and the related research of the economic effect of dividend distribution policy,which provides a theoretical basis for the following cases;secondly,it recaps the general situation of domestic A-share listed companies’ dividend distribution in the last few years,providing the background;thirdly,a case study of Fuyao Glass High Payout is introduced,and the relevant motivations for its implementation of the high payout dividend policy are analyzed,because of its strong economic strength and its high payouts promoted by its investors.Through further analysis of the economic consequences of Fuyao Glass’ s high cash dividend policy,it is concluded that from the perspective of financial effects,the company’s high cash dividend has caused significant capital outflow,increasing the demand for external finance and corporate debt repayment pressure,the corporate cost of capital.And not fully considering external investment opportunities affects the company’s long-term development;from the long-term and short-term analysis of corporate value,the short-term cumulative rate of return of excess corporate stocks for five days near the dividend announcement day does not lead to a rise in the company’s stock price.It is concluded that the prerequisite for implementing the high-value dividend policy is that the company must have a certain degree of economic strength.Fuyao Glass has a good profitability to bring sufficient cash flow,and has a certain ability to issue high cash dividends.But the high payout is also double-faced.On the one hand,it increases the visibility to a certain extent;it increases the company’s financial risk,raises the company’s capital cost,and causes insufficient foreign investment on the other hand.Therefore,this article gives the following suggestions: first,companies should determine the cash dividend distribution rate according to their own conditions;second,use surplus funds to strengthen foreign investment and improve the return on capital investment;third,strengthen company supervision and improve corporate governance.Finally,companies must be aware of their own advantages with which they improve profitability.