Guided Cash Payout Policy and Firm Value: Evidence from China
Journal of Finance and Accounting
Volume 4, Issue 5, September 2016, Pages: 285-292
Received: Aug. 6, 2016; Accepted: Aug. 22, 2016; Published: Sep. 9, 2016
Views 3010      Downloads 126
Authors
Yin-Che Weng, Department of Accounting, Harbin Institute of Technology, Harbin, P. R. China
Shiyu Liu, Department of Accounting, Harbin Institute of Technology, Harbin, P. R. China;School of Business, Trinity College Dublin, Dublin, Ireland
Yu Qi, Department of Finance, University of Texas at Dallas, Richardson, USA
Yadi Qin, Department of Finance, Xiamen University, Xiamen, P. R. China
Article Tools
Follow on us
Abstract
This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.
Keywords
Dividend, Payout Policy, Firm Value, China Market, Regulation
To cite this article
Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin, Guided Cash Payout Policy and Firm Value: Evidence from China, Journal of Finance and Accounting. Vol. 4, No. 5, 2016, pp. 285-292. doi: 10.11648/j.jfa.20160405.15
Copyright
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Fama, E. and French, K. (2001) Disappearing dividends: changing firm characteristics or lower propensity to pay? Journal of Financial Economics, 60, 3–43.
[2]
DeAngelo, H., DeAngelo, L. and Skinner, D. (2004) Are dividends disappearing? Dividend concentration and the consolidation of earnings, Journal of Financial Economics, 72, 425–456.
[3]
Baker, M. and Wurgler, J. (2004a) A catering theory of dividends, Journal of Finance, 59, 1125-1165.
[4]
Baker, M. and Wurgler, J. (2004b) Appearing and disappearing dividends: the link to catering Incentives, Journal of Financial Economics, 73, 271-288.
[5]
Kuo, J. M., Philip, D. and Zhang, Q. (2013) What drives the disappearing dividends phenomenon? Journal of Banking & Finance, 37, 3499-3514.
[6]
DeAngelo, H., DeAngelo, L. and Stulz, R. (2006) Dividend policy and the earned/contributed capital mix: a test of the lifecycle theory, Journal of Financial Economics, 81, 227–254.
[7]
Wang, F. Q. (2013) Cash dividends policy and enterprise life cycle: empirical research based on listed companies of China, The Theory and Practice of Finance and Economics, 34, 74-77.
[8]
Liu, Y. (2012) Empirical Study on the distribution of cash dividends of China listed companies: perspectives of life cycle theory, The Chinese Certified Public Accountant, 6, 97-101.
[9]
Liu, J. and Guo, X. (2009) Analysis of listing companies’ cash distribution policy. Friends of Accounting, 2009, 85-86.
[10]
Wooldridge, J. M. (2002) Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186