The Effect Of Cash Dividends In The Future Performance Of The Signal Value Of Listed Companies

In listed companies, dividend distribution is one of the core issues of financialmanagement. In domestic and abroad, there are a lot of researchers studying on thetheory of dividend and their research findings are very rich. In1961, two professorsnamed Miller and Modigliani proposed the theory “dividend is independent”, which isalways called “MM theory”. After the MM theory, in domestic and abroad, scholars donot apply consensus about the relationship between dividend and the value ofcompanies. According to the signal theory, if the managers estimate that the companyhas a good future prospects and a significant growth of future performance, themanagers will increase the dividend; On the contrary, it will maintain or even reduce thecurrent dividend level. Therefore, the signal theory holds that dividend can transmit thecompany’s future profitability. An important prerequisite of signal theory is thatinformation asymmetry exist managers and shareholders. SME board is an importantfinancing channel for small and medium companies. Most of small plates listedcompanies in the growth stage of the business life cycle, with high growth, high-yieldcharacteristics. The main business aim of SME board is to make their business muchbigger and stronger. Due to the special nature of small plates of the market, if theprerequisite of signal theory can set up and increasing cash dividend have a signal valueon the company’s future performance. It is a problem worthy of study.At first, this research reviewed literatures about the research related to this topic.Then, this research analyzes and summarizes the results of previous studies, proposingthe ideas and methods of this study. In this research, I think increasing cash dividendpayment has no signal value on the future performance when there are absolutecontrolling shareholders among the small plates listed companies. Before empiricalanalysis, the research plans a preliminary analysis about the cash dividend distributionof small plates companies from2007to2011, summing up the characteristics of cashdividend distribution. Finally, an empirical analysis was planning on if there a signa lvalue between cash dividend and the company’s performance when absolute controllingshareholders exist or not，by using descriptive statistics and static panel data analysis.After using the50%stake of the largest shareholder, a scalability testing is conductedby using the40%stake of the largest shareholder. Five related conclusion were summed.In the end of the study, two suggestions are proposed. One is that small investors can invest by analyzing the condition of controlling shareholders and cash dividenddistribution. The other one is that supervision department should relax supervision ofcontrolling shareholders of SME board.