Research On Dividend Policy And Investor Protection

Since the stock market was established in China, the investor, espacilly minority investor's rights and interests have been expropriated, which have become a prevalent phenomenon in China. Investor protection have become a serious and difficult problem.The insider of listed company, mainly including substantial shareholder, expropriate minority investor through tunnelling which including connected transaction, liabilities guarantee, and even a direct stealing and fraud, and so on. With the perfection of laws and regulations' in stock market, the way of transfering the resources of listed companies would be more and more strict limited, except dividend. the dividend policy will play a more and more important roll when substantial shareholder transfer the fund of company.At present, the dividend policy had the characteristics of unstable, dividend distribution behavior being not standardized, low and high dividend payout ratio and so on. That reflect the capriciousness of dividend policy, and substantial shareholder neglected the rights and interests of minority investor. That showed the weak investor protection in China. To investor protection, we should find the reason from the interior and the exterior of listed company. We appraisaled investor protection law and regulations of China with the LLSV indicator system. We found quite perfect investor protection law and regulations, which has achieved the advanced level on international. However, the good law environment has not restrained the substantial shareholder's expropriation to the minority investor effectively. The expropriation mechanism to the minority investor should be digged from the company interior action. The investor protection is defined as two aspects: standard investor protection, namely investor law protection, and substituted investor protection, namely ownership structure.In essence, the investor's rights and interests were different original, the completely unified investor benefit does not exist. The different investor has the different motive, who has the different status in company. The investor has different nature. In enterprise's property rights arrangement, minority investor share dominate residual rights of control and residual claim, which is not the real right. Substantial shareholder dominat the whole company. In addition, asymmetric information and the exteriority of minority investor monitoring. That brought the agency problem between minority investor and substantial shareholder. During the dividend policy decision process, interests game occurid between minority investor and substantial shareholder. Minority investor is always in a passive and negative position. In the serious agent problem company, substantial shareholder may "tunnelling" minority investor with dividend policy. Dividend policy sometimes become the tool of expropriation. In brief, the controlling ability of substantial shareholder decide the situation of substituted investor protection.Base on the data of the stock market in China from 2001 to 2008, dividend policy market response model that including substantial shareholder control and equity restriction ratio was constructed, which tested the market respond of dividend policy, namely the short-term influence of dividend policy to investor. The result indicated:in the same level of dividend payment, the stockholder's rights were more relative disperse, dividend policy announcement would receives higher market appraisal; In the same level of dividend paymen, the stockholder's rights balance more relative higher, dividend policy announced would receives higher market appraisal. That is to say, more disperse and owing balance has more advantageous to investor protection. Next, the case of SHANGHAI PHARMACEUTICAL CO., LTD(600849) dividend policy was selected to test the long term influence of dividend policy to investor. The tagert of the case is testing if the dividend policy transmit a signal of the company's future performance information. The result indicated:the manager may transmit a signal of underestimated company value with dividend policy. If the dividend policy can transmit a company's future performance information, that is a kind of advantage dividend policy to investor protection.The data of the stock market in China from 1993 to 2008 were selected. The model of relatinonship between investor protect and dividend policy was built.In the model, investor law protect and substantial shareholder controlling represnet investor protect, panal data and ECM were used. We draw a series of conclusion. The higher degree investors legal protection, companies tend to pay more dividends. There was a positive relations between substantial shareholder control and dividend yield and dividend payout ratio, which indicate that along with the controlling enhancement, the listed company favors more cash dividends. Moreover, payment rate will also increase along with the controlling ability of substantial shareholder. Equity restriction ratio also affects the dividend policy, more equity restriction ratio means the listed company would not tend to pay more cash dividends. The result confirmed the hypothesis that the substantial shareholder "tunnelling" minority investor, which rather than support the agent cost hypothesis of dividend policy. The result substitution effect of dividend policy to the other "tunnelling" minority investor method that including connected transaction, capital occupying and so on. The effect of debt to dividend policy is not remarkable. The debt can not restrict the substantial shareholder in dividend policy. In brief, the debt government function is weak. On the short term relations, the debt government and company size have unremark influence to dividend yield. Investor protection have week influence to dividend payout ratio. Investor law protection, substantial shareholder control and equity restriction ratio have unremark influence to dividend yield. EPS and audit have remark influence to dividend yield.In order to enhance the predict accuracy of the investor, espacilly minority investor, predict and identify to dividend policy, and avoid risk of investment adverse selection, we constructed dividend policy identify model based on investor protection. That is a BP artificial neural networks. We divides three types dividend policy according to the dividend payment rate. Then, simulating the model. finally results indicated that the accuracy of the model is quite high, reaches 97.06%. we draw a conclusion that the dividend policy BP neural network identify model were quite suit to identify and predict company's dividend policy for investor, espacilly minority investor.The contribution of the dissertation are:Firstly, the investor protection has been redefined. Investor protection should include two aspects:standard investor protection, namely investor law protection, and substituted investor protection, namely ownership structure.Secondly, the relationship between dividend policy and investor protection was revealed. Base on agency theory, we studies the agency relationship in the dividend policy between minority investor and substantial shareholder. The cause of substantial shareholder invclting minority investor was revealed. Moveover, by analyzing ownership structure's effection to dividend, we find that it is ownership structure that is a important factor that determine the level of investor protection.Thirdly, we study the influence of investor law protection and company ownership structure to dividend policy. LLSV indicator system is suit for the investor protection between different countries. We construct the model that investor law protection and company ownership structure to dividend policy, which is suit under the same country. In the model, panel data and ECM were used.we studied the long-term and short-term effect of investor law protection and company ownership structure to dividend policy. That improved empirical research of investor protection and dividend policy. Fourthly, we constructed dividend policy identify model based on investor protection. That is a BP artificial neural networks. We designed input variables including substantial shareholder control, equity restriction ratio and so on, and output variables including dividend policy. The model can identify and predict company's dividend policy. The model provide a new thinking way that relationshiop between investor protection and dividend policy.Fifthly, the market response of dividend policy was analyzed with event study, which can study the short-term effects of dividend policy to investor. The long-term effects of dividend policy to investor was studied with case study method, which make the theory of short-term effects of dividend policy to investor more perfect.