Factors affecting dividend policy of listed companies of

     Abstract: The dividend policy is the core of modern corporate financial management one of the elements.
A reasonable dividend policy will help the company in the capital markets and establish a good corporate image for the company's long-term development and create favorable conditions for the listed company's financial decision-making, dividend policy has a positive significance. Dividend policy of listed companies on the impact of the many factors that were related to discussion.

     Keywords:: listed company; dividend policy; influencing factors

     Dividend policy is one of the modern enterprise three major financial decisions, it is corporate financing and investment activities continue, but also the basis for financing and investment. Appropriate dividend distribution policy can not only set a good corporate image, but also to build the confidence of investors in the company's future prospects, thus creating a good corporate financing environment, the company long-term stable development. Affect the dividend policy choices by many factors, such as the company's profitability, stock price, financing capability. As China's listed companies there is a serious information asymmetry and agency problems, the distribution of dividends of listed companies are often more complex dynamics, in such an environment study on the impact of factors conducive to a listed company to develop an appropriate dividend policy, financial management and operational activities to achieve The goal is also conducive to the shareholders invest in raising awareness of risk awareness and to facilitate their rational investment.


     First, the basic content of dividend policy


     Dividend policy mainly includes three aspects: (1) dividend payout ratio policy, that is to determine the actual distribution of earnings per share and the ratio of earnings available for distribution of high and low; (2) the dividend distribution policy is to refer to steady growth in dividend policy, or residual dividend policy, or is it a fixed dividend policy; (3) the form of dividend payout policy, the common dividend in the form of cash dividends, stock dividends, dividends and share repurchase allotment.

     (A) the dividend payout ratio policy of influencing factors

     As a high-risk financial assets, stock investors suffer from high investment risks and share the company's operating results is the purpose of investors investing in stocks. The more companies to distribute dividends, the higher the dividend payout ratio, the more attractive to investors, the more conducive to establishing a good corporate reputation, the market value of the company stock. But the high dividend payout ratio, but also will reduce the company's retained earnings, thus affecting the company's future development.

     (B) the dividend distribution policy

     Retention and distribution of after-tax profits of checks and balances exist between the allocation of too much, then the corresponding decrease in retained within the company; and vice versa. The distribution of the ratio of the two will affect the company's capital structure, cost of capital, the company's value, or the company's long-term development and so on. Therefore, companies should weigh and consider the impact of various factors, between the two to find an appropriate proportion of self-development for enterprise development dividend distribution policy.


     Second, dividend payout ratio policy of influencing factors


     (A) investment opportunities

     The company's future investment opportunities directly affects the amount of dividend policy choices.
When a company a lot of investment opportunities, the company the one hand, the surplus retained in-house for investment. On the other hand, if the company's lack of a better investment opportunity, you should be paid in cash to investors. Jensen and Meckling that when the company's investment opportunities are more, but the disposable cash flow is relatively small, then the shareholders can tolerate a lower dividend payout ratio of cash. Weygand and JIANG Yi-macro way of a questionnaire survey examined the distribution of China's listed companies issue dividends and found that no distribution of cash dividends of listed companies, mainly because there is a good investment projects, rather than because shareholders do not like the flow of cash dividends.

     In general, investment opportunities, dividend payout ratios of listed companies will primarily affect the performance as follows:

To win the number of investment opportunities. Corporate cash flow belongs to shareholders, management should not retain earnings, except in the same degree of risk under the re-investment rate of return higher than the shareholders. If an enterprise has a large number of able to capitalize on investment opportunities, it will reduce the target payment rate, if only a few profitable investment opportunities, and vice versa.

To accelerate or delay the project possibilities. The ability to accelerate or defer the project will help enterprises to maintain a relatively stable dividend policy. Has a stronger ability to accelerate or delay the project company can be an adequate source of funds according to the company whether or not the timing of the decision to implement the project without having to make their own dividend policy is changing dramatically.

     (B) fund-raising capacity

Profitability. The company's profitability affect its dividend payout ratio policies. In essence, the company's dividend policy is to achieve net profit, and after paying income tax and collection of a variety of provident fund, paid to shareholders as dividends or reinvested in the company to stay between the two trade-off with the basic principles, Therefore, theoretically speaking, the level of profitability is the highest dividend payout limit. Baker in 1985 by the New York Stock Exchange listed companies of the 318 questionnaires come to the conclusion of the study, namely, in the manufacturing, wholesale and retail trade and utilities three industries, the company dividend policy of the most important factor is the expected future level of profitability. Lu Yangtze, Wang Kemin in 1999, studied the use of Lintner-signal model of Shanghai and Shenzhen cities 1997-1998 annual payment of cash dividends of all 316 listed companies that pay dividends depends primarily on the level of current level of profitability the company and its future changes.

New stock issuance costs. Issuance of new shares of the transaction costs and negative signaling effect is the cost of issuing new shares. IPO costs are high dividend payout ratio should be reduced, with retained earnings, so the lower cost of financing within the equity financing alternative to issuing new shares of external equity financing.

     3. Financing capacity. The financing capacity of a listed company to determine the level of dividend payout ratio must be considered an important factor. Rational use of dividend policy, not only create a good corporate image, but also be able to adjust the company's financial indicators, to be financed in line with regulatory requirements, ensure that the company has a long-term, stable re-financing capacity. Wu Lina, Gao Qiang and Yan Peng Shanghai and Shenzhen in 2003, the use of the allocation for 2000-2001 is now company as the overall sample, explore the impact "abnormally high faction now" factor was found: a listed company attaches great importance to the stock market to refinance qualifications, listed company's net assets yield rate closer to compliance range of placements (6%, 7%), the more prone to high camp is now. Shi Gui-Feng and Ouyang south from Xining Special Steel high cash dividends, convertible bond financing to start a series of financial decision-making, using case study method, the Chinese stock market high cash dividends and re-financing of acts of in-depth study, The results showed that: Xining Special Steel is due to the high cash dividends through higher allocation of net assets are adjusted rate of return, and thus to achieve regulatory approval on the convertible bonds, regulatory requirements. Other researchers have also been a similar conclusion through empirical. Reposted elsewhere in the paper for free download http://eng.hi138.com

     (C) the dividend policy on the cost of equity capital of

The shareholders on the current income and future income preferences. Shareholders on the current income and future income to the different preferences even if faced with the same budget constraints will also be on the timing and amount of cash inflows have different choices. Preference for the existing high-income shareholders prefer dividend payout ratio of dividend policy, preference shareholders of future income are more willing to keep more of their retained earnings of the company to ensure the company's long-term development.

Dividends and capital gains of the risks. Common stock returns to shareholders include two parts, one dividend income; second is capital gains. A bird in the hand theory suggests that a high dividend payout ratio could enable enterprises to maximize the value, because investors believe that the risk of the cash dividend is less than the potential capital gains. Safe hand preference dividends paid to shareholders often require a stable dividend.

     3. Capital gains relative to the dividend tax breaks. Country's tax policies would affect the returns to shareholders, which led to the shareholders of the dividend policy choices. Long-term capital tax preference theory suggests that there is more benefit than the dividend tax advantages, investors are more willing to retain the company retained earnings. Some high-dividend income to shareholders against the company for tax avoidance is often a higher cash dividend payment.

     (D) The company's stock price

     Optimum theory suggests that stock price is too low will reduce the company's reputation, while the high stock price would decrease liquidity and trading activity, reasonable and stable stock price is the company's pursuit of one of the goals, while the dividend payout ratio will affect the stock price fluctuations, thereby maintaining the appropriate stock dividend payout ratio is the company to develop the policy need to consider. Baker in 1985 by the New York Stock Exchange, 318 listed companies conducted a questionnaire survey that maintain or enhance the company's stock prices affect the company's dividend policy needs to be an important factor. Chan Kwok-fai, and Chun-Guang Zhao to the end of 1996 in Shenzhen, Shanghai and cities listed in the 1997 dividends or to fund all the A-share companies Zhuanzengguben for the overall sample, using multiple regression analysis, single-factor analysis, classification statistical analysis to study and found that samples of the company's stock price and cash dividends and stock dividends are positively correlated.

     (E) solvency

     At present, the general view is that the index of listed companies to determine their dividend payout rates have a major impact. The solvency of the original red flag that the company mainly through the circulation to affect the cash dividend from a restraining effect, while severe solvency funding environment is a prerequisite for the role of indicators occurred. Lu Yangtze, Wang Kemin right 1997-1999 Shenzhen and Shanghai cities had paid a cash dividend of 231 listed companies empirical analysis that for China's listed companies, capital structure and dividend distribution policy has a two-way causal relationship, that is, the company compensation debt capacity of the weaker, the lower dividend payout ratio, while the company's higher dividend payout ratio, the stronger is its debt capacity. The Yang Qi-yuan, LI Li in 2004, all A-share listed companies sample empirical results of the analysis showed that "the state-owned nature" of listed companies in the formulation of policy dividend payout ratio is not very great importance to the solvency indicators.


     Third, the choice of dividend policy


     Company's current stage of development, the company's dividend distribution policy choice the most important factor, because such positioning of the stage of development determines the company's future development direction, and will lead to many other elements of the change. Therefore, the company should be based on the specific stage of development to choose the applicable dividend policy. Generally considered: at the initial stage of the company operating in the high-risk, financing and capacity is weak, is a pure net cash outflow stage, in order to reduce financial risk, companies should choose not to allocate the remaining type or dividend policy; in the high-growth stage companies need to the rapid expansion of production capacity in order to achieve the scale advantages, we must invest heavily, in theory, should not declare a dividend, but as the company already has a certain scale, investors often demand dividends, in order to strike a balance between the requirements to be a low regular dividend plus additional payments based dividend policy; in the stable growth stage companies, their products, market capacity, the steady growth of sales revenue, reduced demand for investment in capacity expansion, advertising expenses declining proportion of the cash flow performance net cash inflows, usually have the ability to continue to pay higher dividends should be used to steady growth in dividend policy; reached a mature stage of the company, due to market saturation, no sales growth, profitability and stability, and there is a considerable surplus and capital accumulation, we can consider the stability growth-oriented dividend policy to fixed dividend policy, in line with the company's entire development stage of adaptation; while the recession phase of the company, if the company or other companies will not be dissolved by the restructuring and merger, we must invest in new industries and areas, to seek new growth points, investment demand increases, but the company at this stage is usually the reality is that product sales revenue, profits drop, has lost its ability to pay high dividends should be used in residual-based dividend policy.

     To sum up, affect the company's dividend policy related to many factors, but among these factors are often interrelated and mutual restraint, and some quantifiable and some non-quantifiable, their combined effect can not be concluded only through quantitative analysis. Therefore, the dividend policy-making needs of a specific environment for qualitative analysis in order to achieve a balance between various interests, to maximize reach the goal of maximizing shareholder wealth.



     [1] Luo Rong, Roger.
On the impact of corporate dividend policy, the main factors [J]. The financial sector, 2007, (2).

     [2] Xu Xiaoying.
Tradable share reform of listed companies after the dividend policy research [J]. Modern economic management, 2008, (1).

     [3] Yu Gui.
Encouraged to influence policy research [J]. Shandong University of Technology, 2004, (9).

     [4] Wu Hao.
Listed company dividend policy perspective [J]. Finance and banking, 2003, (10).

     [5] Li Li, Wang Man Shu, Qi Yin-feng.
Who decides on dividend policy and choice dynamics [J]. Financial Research, 2006, (1). Reposted elsewhere in the paper for free download http://eng.hi138.com

Securities Other Papers