A Study On The Impact Factors And Econimic Consequences Of Cash Dividend Unsmoothing In Chinese Listed Companies

The issue of dividend smoothing is one of classical issue in dividend study since Lintner(1956).However,Leary and Michaely(2011)make some important contribution to break through the classical issue and to lead frontier research grow up on dividend smoothing.Their paper studied Lintner(1956)model and its subsequent model to discuss the measure defect,reconstructed the measurement method of dividend smoothing,and captured the degree of deviation between different measurement methods.After that they created a newly revised measurement model,and firstly studied the influencing factors of the dividend smoothing in U.S.listed companies.In academic,the breakthrough in measurement method is one of important characteristics for promoting dividend smoothing research grow up,which at the same time is one of the most conspicuous signs for frontier research.Thus,it caused a new progress in the international academic for using agency hypothesis,information asymmetry hypothesis,equity hypothesis,industry concentration hypothesis and so on to study the driving factors on dividend smoothing and the economic consequences of dividend smoothing.In one of newly review paper of dividend policy,Farre-Mensa,Michaely,and Schmalz(2014)also highlighted the unique status of dividend smoothing in the future research.From the comparison of China and the U.S.or other mature capital market countries,many outstanding market anomalies exist in Chinese listed companies.Such as “Zero dividend” phenomenon,“high stock dividend” phenomenon,“cash dividend unsmoothing” phenomenon,“unsystematic dividend” phenomenon and so on.A lot of researches in China have been involved in the first two phenomena,but the lack of a more systematic basis and application of innovative research on the phenomenon of dividend unsmoothing.This left an opportunity for this study.To fit and to promote the domestic and international research trends,choosing dividend unsmoothing in Chinese listed companies as research object is the origination of this study.Consistently,this study use the agency conflict hypothesis,information asymmetry hypothesis and investor behavior preference theory,to study what and how is the role do dividend smoothing play in mitigating agency conflicts,what are driving factors of dividend unsmoothing,what are economic consequences of dividend unsmoothing and how market reaction to the new deal dividend regulation of China Securities Regulatory Commission.The main contents and conclusions are summarized as follows:Firstly,this study review the frontier research on dividend smoothing both at home and abroad.It clarify the nature of the dividend smoothing from the concept to the connotation,and summarize its measuring methods.It investigate the determinants of dividend smoothing and its economic consequences.It review the research status on dividend smoothing of China's situation.It conclude the shortages of existing research and the future research direction,and built a "macro-micro-macro" system analysis framework on dividend smoothing.These works provide the forefront of research materials about dividend smoothing to domestic scholars,and also help to build up the research framework of this study.Secondly,this study research what is and how the role do dividend smoothing play in mitigating the agency conflicts.Actually,internal capital misallocation always leads to the war of control between company owner and manager.How to setup an optimal cash holding structure including investment income and cash dividend rate scheme as a decision framework for company value improvement become more and more important.This study uses a newsvendor model and build the strategic interaction as a Stackelberg game to analyze the effect of optimal cash holding structure from the owner's perspective,considering both company owner and manager are capital constrained and in need of short-term financing with bankruptcy risks.It find that a risk-neutral owner should always set the cash dividend rate equal to industry cash dividend for offering convenient on using money to manager;The manager will always prefer investing capital by himself to borrowing outside capital;Under optimal cash holding structure,both the owner's profits and capital supply chain improve,and the manager might improve his profits relative to under borrowing outside capital depending on his current compensation contracts.The findings support the “information” hypothesis in internal capital markets and provide guidance for company owner when facing manager market full of strong tendency of private benefits of control.Thirdly,this study first document the determinants of dividend unsmoothing in Chinese listed companies.It analysis whether agency conflict hypothesis,information asymmetry hypothesis are suitable or not for explaining the phenomenon of dividend unsmoothing in China.Using data from A-shares listed companies,it find that firms with plenty of cash flow,high dividend yields,high separation of the control rights and cash flow rights,and state-owned enterprises,smooth more.Smaller firms,firms with high earnings volatility,high stock return volatility,more dispersion and more fluctuation analyst earnings forecasts,smooth less.It also find that the phenomenon of dividend unsmoothing has not weakened,but further intensified after year 2008.Overall,the results show that the self-motivation of major shareholder and management is intrinsic motivation on firms' dividend unsmoothing;firms' weak information transparency is a prerequisite for dividend unsmoothing;firms' cash dividend policy does not become effective part of corporate governance is the sticking point.These findings not only provide evidences that how agency conflict hypothesis,information asymmetry hypothesis explaining the dividend unsmoothing in Chinese listed companies but also provide the guidance for the practice in the evolution of the capital market dividend regulatory policy.Fourthly,this study analyze and examine the influence of listed company's cash dividend unsmoothing on the investor's behavior preference.Cash dividend unsmoothing is one of the prominent phenomena in China capital market.But so far,it is still not clear that investors' prefer to unsmoothing dividends stock or not.Using A-share data of listed companies,it finds that cash dividend unsmoothing negative associated with overall institutional investors' shareholding number,Non-independent institutional investors' shareholding number,and the effect is more obvious before the Split Share Structure Reform finished.Moreover,investors prefer cash dividend unsmoothing stock portfolio to market portfolio contains “miser” and “no rules” stocks,but the level of cash dividend unsmoothing do not significantly affect investors' short-term wealth.Further,investors hold stock portfolio with low level of dividend unsmoothing than high level of dividend unsmoothing need to pay more 4.2% dividend smoothing premium.More than that,cash dividend unsmoothing has significant influence on investors' expected return.Finally,this study research how market reaction to the new deal dividend regulation of China Securities Regulatory Commission.Cash dividend regulatory guidelines is one of institution arrangements to implement a dividend regulation policy in Chinese stock market.Then,is information transparency of management dividend commitment different? How investors of the listed company give response to management dividend commitment? Using a special setting,it tests the relationship between management dividend commitment and investors' market reaction,with the samples that announcing revised edition of company regulations during CSRC published "regulatory guidelines for listed company No.3" and "guidelines for clauses of listed company regulations".It finds that: investors' cumulative abnormal return of company with unique content in revised edition of company regulation is higher 1.13% than company with non-unique content in revised edition of company regulation.Investors' cumulative abnormal return is associated with higher accurate content and higher process precision clauses in revised edition of company regulation.Using PSM method,the result is consistent with the findings.Moreover,the treated group company's dividend unsmoothing significant reduce after publishing revised edition of company regulations.Overall,our findings suggest that the transparency of clauses of company regulations increase and improve companies' governance quality,investors' short-term wealth and ameliorate the situation of companies' dividend unsmoothing.Thus,cash dividend regulatory guidelines is accepted and appreciated by investors in Chinese capital market.Based on the analysis and the conclusion of the driving factors,the economic consequences of dividend unsmoothing and the effectiveness of the new dividend regulation policy on dividend unsmoothing,this study provide the corresponding policy recommendations at the end.