Research On The Motivation And Economic Consequences Of JMC’s High Cash Dividend

In the financial management of modern companies,dividend policy is an essential link between enterprises and shareholders as an vital part of it.Cash dividend is a widely used dividend distribution method of listed companies,and with the continuous development of economy,the number of listed companies that choose high cash dividend is also increasing.On the one hand,high cash dividend brings more tangible benefits to investors;On the other hand,high cash dividend will make a large amount of cash flow out of the enterprise.However,we can’t assert whether the high dividend is good or bad across the board,but we should analyze the motivation and economic consequences behind the high dividend according to the specific case company.Firstly,through the method of literature analysis,this paper combs the different definitions of high cash dividend by domestic scholars,and divides the cash dividend into normal high cash dividend,abnormal high cash dividend and non high cash dividend according to the standards adopted in this paper;It also reviews and sorts out the current research status on the motivation and economic consequences of high cash dividend by scholars at home and abroad.Then,it reviews the theoretical basis of high cash dividend and the different definitions of high cash dividend by domestic scholars,and divides cash dividend into normal high cash dividend,abnormal high cash dividend and non high cash dividend according to the standards adopted in this paper.Secondly,it combs the cash dividends of JMC and China’s automobile manufacturing industry in recent ten years.Then,this paper finds that JMC has sufficient cash flow level to support high cash dividend,by analyzing its financial situation.Then,through specific analysis,this paper believes that the internal and external motivation of JMC ’s high cash dividend mainly includes the following points: the life cycle is in a mature stage and insufficient new investment,catering to the interests of controlling shareholders,semi mandatory dividend policy,playing to the role of signal transference,automobile manufacturing industry is keen on high cash dividend,etc.This paper analyzes the economic consequences of JMC’s high cash dividend,and finds that the normal high cash dividend has little impact on JMC’s financing cost,operation ability and development ability,and will be conducive to advance enterprise value;However,the unusually high cash dividend makes JMC’s solvency decline,increases the financing cost,limits the development of the enterprise and reduces the value of the enterprise.In terms of market response,high cash dividend did not bring a good short-term market response to JMC most of the time,and fail to realize the effect of boosting the stock price in the long term.Finally,this paper puts forward the following three suggestions for JMC and the regulatory authorities: first,improve their own financial situation and formulate a reasonable dividend policy;Second,strengthen research and development and improve the level of core technology;Third,the regulatory authorities refine the laws and regulations related to dividends.