Research On The Effect Of Cash Dividends On Position-related Consumption And Over-investment From The Perspective Of Agency Cost

Dividend policy is not only one of the three major financial fields, but also animportant component of the corporate governance mechanism. Theoretically,according to the agency model of dividends, we can deduce that the dividends reducemoral hazard and adverse selection, thereby inhibiting the position-relatedconsumption and over-investment behavior of management. While in the realenvironment, on the stock market of China, the problem of asymmetric informationbetween shareholders and management in the listed companies is very prominent,and the agency problem is serious, as more and more attention are paid to cashdividends from regulators, the dividend policy is become one of the means to solvethese problems. This paper studies the dividends’ inhibition of agency costs, at thesame time, focuses on whether the function is changed in different property right s oflisted companies, and tries to provide empirical evidence for dividend policy inChina.Based on the above background, the paper uses the principal-agent theory andfree cash flow hypothesis as the basis, we find that the agency cost betweenshareholders and business management mainly bodies on the position-relatedconsumption and over-investment behavior. At the same time, on the dividendagency theory and property right theory, analysis of corporate dividends governanceeffects of the two kinds of agent cost, and under the premise of the di fferent propertyright enterprise, explore whether cash dividends inhibition of position-relatedconsumption and excessive investment is different. Choosing the A-share firms from2010-2012as the test samples, we analyze its effect from the point view of agentcost. The conclusions show that cash dividends and the two kinds of agent cost issignificantly negatively correlated, further, the state-owned property companiesweakens the effect of agency cost governance mechanism. According to the researchconclusion of the article, we propose to some suggestions, such as improving thestrength of cash dividends, enhancing the supervision and control of position-relatedconsumption, marketing executives’ shareholding incentives and using the functionof debt policies.