Dividend policy in Chinese stock market 上海理工大学 摘要：本文解释了鼓励政策的定义和现今中国企业通常使用的股利政策方法。文中将对中国与西方的股利政策的异同进行对比，同时分析了具有中国特色股利政策形成的原因，并且提出了一些改善现状的意见和建议。
关键词:股利政策现金股利股票股利
Abstract:This paper explains the definition of the dividend policy and several ways that it is shared by companies.The next following paragraphs make a comparison between the western dividend policy with that of the China.Several reasons for the distinct features of Chinese dividend policy is given.Four points are suggested to improve the current situation.
Key words:dividend policycash dividendstock dividend
［Introduction］ Dividends are payments made by a corporation to its shareholder members.It is the portion of corporate profits paid out to stockholders.When a corporation earns a profit or surplus,that money can be put to two uses: it can either be re-invested in the business （called retained earnings）,or it can be paid to the shareholders as a dividend.Many corporations retain a portion of their earnings and pay the remainder as a dividend.The dividend policy varies from country to country from the very beginning.Chinese stock market just developed,it is worthwhile discussing the Chinese different policy.
［Research background］ Dividend policy,one of the three corporation financial decisions,has been concerned among theoreticians and practitioners.John Lintner （1956） brought forward a model of dividend adjustment.Modigliani and Miller （1961） argued that dividend policy has no effect on either the price of a firm"s stock or its cost of capital,in a perfect world,the dividend policy is irrelevant to shareholders wealth.This proposition has laid a solid theoretical foundation for the dividend policy.After that,economists have offered explanations in different ways about dividend paymen.Over decades,economists could not come to an agreement.Thus,Black,Fischer （1976） gave it a name “dividend puzzle”.
In order to resolve the “dividend puzzle” in china,many Chinese scholars have done a number of empirical studies.Two main approaches were taken in these studies:
Firstly,using event study method to analyze the influence of different dividend policy on share price and the value of a firm.Wei Chen et al （1999） empirical analyzed the dividend policy of Shanghai stock market by the method of Cumulative Abnormal Return （CAR） and study the existence and character of the signaling effect of dividend policy in this market.Yu Qiao et al （2001） found that there was evidential positive statistical relationship between the dividends and mix dividend policies of firms on the stock market.But their study showed that the market was not sensitive with cash dividends.Gang Wei （2000） found that dividend policy often signal the information of long-term earnings about a firm for investors.
Secondly,based on diversified dividend policy theories,analyzers analyzed dynamic reasons of dividend policy,and tried to find impact of dynamic factors and influencing extent on dividend policy of firms.Different point of view offered different significant conclusions.For example,cash dividend may be affected by currency balance and retained earnings,and has positive relationship with them （Yang,2000）;different size of firms choose different pattern of dividend: small firms tend to choose stock dividend,while large firms prefer cash dividend （Yan,2001;Zhao,2001）.If the firms have lower proportion of holding state shares and corporative shares and the stronger self-growth and development of firms,the firms enjoy the higher stock dividend payment,and also the lower cash dividend payment （Lu,1999）.Recently,more and more investors prefer cash flow,because of the idea that “cash is king” which have become many managers’ conception.
［Main part］As we all know,the dividend policy is a company"s stance on whether it will pay out profits as dividends or keep them as retained earnings.If the company decides to issue dividends,the policy will outline whether or not the dividends will be issued on an ongoing basis,or if the dividend payout will be infrequent.There are different types of the dividend policy which are cash dividends,stock dividends,stock split and share repurchases.They are the four major types of dividends,however,the actual dividend policy differs from one country to another.
In western countries,the dividend policy is regarded as the most essential information for the developing situation of a company.In order to keep a good reputation,most companies are inclined to conduct the stable dividend policy,which means that they will fix the dividend on to a point.Even though the profit may increase,they will not increase the dividend dramatically,instead,they will add the dividend gradually,which will give the investors a wonderful impression on their companies.In addition,most companies prefer to use the cash dividends so as to keep the control of the company and increase the stock rights steadily.According to a research,over 85% of the companies regard the cash dividends as their major way of dividend policy.Besides the cash dividends,the stock repurchase is an equally significant way.As a survey shows that from June 1997 to June 1999,the market value of the stocks that are purchased account for 72%.Finally,the laws that assist the stock market running efficiently are impeccable.They are enacted to protect the rights of the investors.For instance,in some developed countries,the law requires companies to at least share a number of profit.
Compared with the developed countries,there are several unique features of Chinese dividend policy.First,mostcompanies are unwilling to share the cash dividend with investors.As the following chart shows that from 1997 to 2000,over 50% of the companies did not share the profit with investors.Though in 2000,the CSRC published a law to improve this situation,it did not help a lot actually.From 2000 to 2004,the ratio was still above 40%,
Secondly,as I mentioned above that most foreign countries will be stick to a stable dividend policy.Nonetheless,it is not the same case inChina.It is a common situation that in china a lot of companies lack a long-term dividend policy plan.So the policy may change a lot as the economy changes.Besides,most senior managers does not take the dividend policy seriously.They sometimes change them without any announcement or delay to take the policy into practice.From 1996-2000,companies that are able to give investors constant dividend count just for 4.5%.
Thirdly,instead of cash dividend,the stock dividend ispreferred by companies.Though stock dividend makes up a large part of the dividend,the whole dividend ratio is still unbelievably low.Besides the stock dividend,there are some other newly combined ways to share profit..The way to dispatch dividend varies as time goes by.For example,in 1997 the ratio of the companies that dispatch stock dividend was 20.04%,which decreased to 7.63% in 2000.Conversely,in 2000,the cash dividend ratio increased to 56.34%.
Fourthly,as we all know that the laws protecting investors are perfect in foreign countries.Nevertheless,in china,investors just lack the self-protecting sense by laws.Because the majority of investors are regarded as single,so it is hard for them to combine together to fight for their legal rights,which is ignored by most companies.
Finally,the stock dividend is more related to the stock market than the cash dividend.The stockmarket has a positive relationship with the stock dividend while it has a negative relationship with the cash dividend.As it is shown in the market that the high cash dividend companies usually have a just general prices and investors do not like to invest in this kind of companies.By contrast,once the information that the company is going to share stock dividend,the price of the company will soar dramatically.
Since Chinese stock market is a newly merged capital market.It is inevitable that there are some shortcomings and drawbacks.There must be several reasons for being so.
Firstly,it is our unique system.Capital market in western counties are almost free of government control.However,in china,the government plays an essential role in the stock market.One obvious example is that the policy could affect the market much more than it is supposed to.In this kind of market,it is not surprise that why the investors rights are overlooked.
Secondly,the structure of the stock rights.The equity division is a historical problem in China.This is a constraint for the companies to operate its capital asset freely.Admittedly,there exists the imbalance of information between investors.
Thirdly,it is difficult for companies to raise capital.Because our capital market has not well developed yet.There are few ways that companies could get money from.Besides,governments have a really strict control over the loans.So companies may sometimes lack of money.It is reasonable for them to now share dividend.
Fourthly,it is impossible for the companies to get its dividend policy done according to the financial management goal just as the western companies do.Chinese companies do not have a perfect understanding of their financial goal,which leads to the lack of standardization and the lower of the profit.They are unable to make great use of the capital they already have.It is impossible for them to realize the rights of investors.
Finally,asI mentioned before,Chinese stock market is still developing.The supervision by the SCRC may not be sufficient.Besides,thought lots of laws are seemed to be enacted,few of them are detailed and could be put into use.Because investors have to give tax on the cash dividend,this is one of the reasons that the cash dividend is not the best choice for them.
As I analyzed above,it is obvious that the Chinese dividend policy is notrational,which may have a horrible influence our the further development.In order to make Chinese market much more perfect and developed.I will propose some possible advice.
Firstly,it is our primary responsibility to help the stock market go mature.In order to do so,there are actually a lot left to do.For instance,detailed laws have to be enacted so that the performance of the companies would be welldeveloped.Punishment is sometime necessary.Investors should learn to protect themselves from being cheated by using laws.
Secondly,companies’ goals have to be clear so that they know what to do.They should know why they want to raise capital,how to raise capital and how to use them wisely.These are all the questions that should be take into consideration.Long term,short term and middle term goals are needed.
Thirdly,companies should put investors on to the first place.They have to have a good relationship with investors.While making decisions,they should think on behalf of the investors’ rights.Different goals for different period is a wonderful way to have jobs done quickly and perfectly.
Finally,since the foreign countries are proved successful.It is the best way for China to learn something from them.Such as the laws,the attitude towards investors.By reading their experience,we are able to conclude our own way to success.Actually,the repurchase of stock is a nice way to help out companies.
［Conclusion］ In conclusion,the difference and the uniqueness of the Chinese stock market perfectly explain the irrationality of government,investors and companies.They maybe have some drawback.As Chinese market develops in the future.Everything will be fixed and we could find out a best and suitable way for our capital market to continue flourishing.
Reference：
［1］金秀，吴豪，梁好，关于我国鼓励政策的探讨，文章编号：1008-3758（2002）04-0259-04
［2］刘丽珑，对我国股利政策的思考
［3］表中数据参见《西南证券解读上市公司》
［4］https://www.省略/6489/dividend_policy.html
［5］Shulian Liu,Yanhong Hu，Empirical Analysis of Cash Dividend Payment in Chinese Listed Companies
［6］https://en.省略/wiki/Dividend（责任编辑：郭 伟）