Effcts Of Cash Dividend Distribution Of A-share Companies: An Agency Cost Perspective

Responding to the severe problem of high agency cost of A-sharecompanies, the article points out that distributing cash dividends cansignificantly reduce the agency cost of those Chinese listed companies.Meanwhile it also shows that the dividend payout ratio is not anappropriate criterion to judge whether an A-share company is qualifiedfor re-financing.To support the arguments, Management Expense Ratio and AssetTurnover Days are applied as proxies of the agency cost of A-sharecompanies. These two proxies comprehensively describe the agency costlevel of a company from both expense and output sides. The articleapplies an OLS model to test the effects of distributing cash dividends onagency cost reduction of A-share companies after the equity divisionreform. The test results significantly support the arguments. The article also innovatively reveals a positive correlation between the “excessivedividend distribution” and the agency cost of A-share companies.Based on the statistical analysis, the article also explores the benefitsof a potential policy improvement in the discussion section.