Dividend Tax Reform,Managerial Ownership And Dividend Policy

The separation of ownership and management is a common feature faced by companies.Agency conflict exists between managers and owners.Management shareholding becomes an important means to solve agency problems.China Dividend Tax Differentiation Reform in 2012 first linked the investor’s holding time to dividend tax.The longer the investors held stocks,the lower they paid for dividend tax.The managers’holding period generally exceeds 1 year,so dividend tax rate of managers is lowest.This reform gives this article an opportunity to study how managers allocates cash flow when tax costs fall,whether to increase reinvestment or increase dividends?And what effect will this decision have?Based on the reform of dividend tax differentiation in 2012,this paper uses samples from 2009 to 2014 to construct a continuous DID model to study the impact of managerial ownership on dividend policy and corporate investment,as well as the investment efficiency,company value and market performance.The empirical findings of this paper are:(1)After the dividend tax reform,the higher level managers holds stocks,the lower companies pay cash dividends.(2)The higher level managers holds stocks,the more companies carry out investment.(3)The higher the expected cash dividend was,the more negative the market reaction was during the period when the reform was promulgated.In further research,we found that for companies with higher growth,the negative impact of managerial ownership on dividend policy is more significant;after the reform,underinvestment situation of companies which paid lower dividends will be alleviated and companies that implement low dividend policies will have better market value and market performance.The research in this article can enrich the literature on the factors affecting dividend policy and provide a reference for explaining the "dividend mystery" under the dividend tax reform in 2012.In addition,the research in this article can provide a reference for listed companies to formulate dividend policy and equity incentive design,and ideas for our country to deepen the dividend tax reform in future.