Empirical Study Of The Relationship Between The Capital Cost And The Dividend Policy Of Chinese State-owned Listed Companies

The cost of capital is the core of financial theory. The basic assumption of corporate finance is that the investors to the financing of enterprises. They expect a certain return on investment, such a return on the company's financing costs. Corporate value by the cost of capital is a series of discounted cash flow and capital costs directly affect the value of the company. The research of capital costs is the basic content of Finance under the premise of shareholders on a maximization of wealth. This includes: how to invest (the value of decision-making projects), how to finance (capital structure decision-making); provide investors with the number of returns (dividend policy decision-making). Dividend policy is that the after-tax profits as a dividend distributed to shareholders or as retained earnings retained in the enterprise. Dividend policy is of one the three core of modern company's financial activities. Dividend policy it is the extension of investment activities and fund-raising activities and it's the inevitable result of company's financial activities. Due to the special in equity structure, Chinese state-owned listed companies have theirs own particularity in cost of capital and dividend policy. Therefore it is the necessary to research on the cost of capital and dividend policies, particularly the relationship between the two of the state-owned listed companies. In this paper, we choose Chinese state-owned listed manufacturing company which issue a shares in Shanghai and Shenzhen cities for three consecutive years 2004-2006 as the data sample data and do empirical analysis on the relationship between the cost of capital and dividend policies.Empirical part of this paper is divided into two main parts: the first part is the empirical research on the relationship between capital cost, capital structure and dividend policy. This section covers two main areas: First, asking assumption, using descriptive statistics and the establishment of the linear regression equation approach to analyze relationship between the assets and liabilities rate, the cost of capital and the per share cash dividend; Second, asking assumption, using descriptive statistics and the establishment of the Logistic regression equation to analyze relationship between assets and liabilities rate, the cost of capital and the payment of cash dividends . The second part is the empirical research on the relationship between the cost of capital, dividends and the maximization of shareholder wealth. This is according to the financial goals of the major shareholder wealth maximization. Using descriptive statistics and related analytical approach to analyze relationship between the rate of pay dividends, capital gains rate and the cost of equity capital .The main conclusions of the paper are as follow. First, there is negative correlation between share cash dividend, the payment of cash dividends and financial leverage of Chinese state-owned listed companies. Second,there is positively correlation between share cash dividend, the payment of cash dividends and capital costs of Chinese state-owned listed companies, but this correlation is not significant. Third, Chinese state-owned listed companies not able to complete the objective of maximizing shareholder wealth, that is, shareholders receive capital gains and dividends paid interest rate is inability to recover its cost of equity capital. Fourth, Chinese state-owned listed failure to equity capital costs as the basis for decision-making dividends. Finally, at the end of the paper , we proposed a series of policies to Chinese state-owned listed companies'governance and relevant management agencies proposed in order to strengthen Chinese state-owned listed companies'concept of the cost of capital and make reasonable dividend policy decisions.