Identification,Motivation And Consequences Analysis Of Abnormally High Cash Dividends

At the early stage of development,most enterprises were in the development stage of the life cycle theory,and retained profits were more likely to be used to expand their business scale than to pay dividends.With the growing maturity of the capital market,there are still many enterprises that seem to be "iron roosters",paying little or no dividends.In response to this situation,the Securities Regulatory Commission has repeatedly issued relevant policies to rectify them.However,there is still a lack of regulation on another kind of abnormal payout in the market-abnormally high payouts.Some studies have shown that high payout policies are more likely to become a tool for major shareholders to gouge the company and transfer benefits to themselves when the shareholding structure is dominated by one share.This paper takes Chongqing Department Store Co.,Ltd.as an example and focuses on actual cases based on the existing research literature.Firstly,we analyse the abnormalities of its high cash payout policy for two consecutive years and its motivation from the aspects of when the high cash payout policy started,the amount of cash payout and the financial position of the controlling majority shareholder and nonarm’s length connected transactions;then we further analyse the economic consequences of the cash payout policy from three aspects: enterprise value,surplus capacity and solvency;finally,we make an evaluation of its high cash payout policy;and to the small and medium shareholders as well as the Securities and Futures Commission,we Finally,we will make an evaluation of the high cash payout policy,and make recommendations and measures to identify and regulate abnormally high cash payouts to the shareholders and the SFC.The case study revealed that the main reason for Chongqing Department Store’s high cash payout was not to "safeguard the interests of investors,especially small and medium-sized investors" as it claimed,but to transfer benefits to the shareholders introduced during the hybrid reform.The unusually high cash payout for two consecutive years has not had a lasting positive impact on the value of the business and has caused the company to have less surplus capacity than other companies in the industry in the post-epidemic era;at the same time,the high cash payout has damaged its asset structure and increased its financial risk significantly compared to the predividend period.The company has used its undistributed profits to pay out dividends for two consecutive years,which not only makes the dividend policy inconsistent and unsustainable,but also undermines the company’s ability to grow in the long term.However,when using the event analysis method,it was found that Chongqing Department Store’s excess cumulative returns all rose after the high payout event,suggesting that there are still investors who perceive high payouts as positive information.Based on the analysis,the article suggests that small and medium shareholders can simply identify and judge abnormally high cash payouts by comparing cash payouts with net profits and cash flows;the SFC should further protect and enhance the voting voice of small and medium shareholders in the formulation of dividend policies by enterprises,while making good use of media channels and online platforms to form a regulatory and deterrent effect on the hollowing out behaviour of major shareholders;the SFC can also make it mandatory for enterprises with high equity concentration to The SFC can also make it mandatory for enterprises with high concentration of shareholdings to disclose their profit distribution plans,and at the same time set up a special department to supervise the plans they disclose,so as to identify abnormally high payouts in a timely manner and prevent large shareholders from emptying out their shares to the detriment of small and medium shareholders.From a comprehensive analysis,this case study has served as an inspiration to remind small and medium-sized investors to establish proper investment awareness and be on the alert for abnormally high payouts;it also has certain implications for the regulatory authorities to take specific measures to identify and regulate abnormally high payouts.