How Different Dividend Policy Affects Corporate Finance With Two-sided Learning

Capital is the driving force for the sustainable development of enterprises. It hasbecome a key issue of modern corporate finance that whether we have the ability toutilize effective financing channels in the capital markets to raise funds successfully,which is necessary for the development of enterprises. Company’s dividend policy isan important research area in modern corporate finance. How does the policy affectcorporate financing behavior? This paper is to find that when the companies andinvestors in the capital market have the ability to learn, the relationship betweencorporate financing choices and securities pricing, and the impact of differentdividend policies on the decision for securities issued, and then try to find out thatwhether there is a link between the dividend policy and financing options. Comparedwith other analysis methods, the method of computational experiments ischaracterized by individual-oriented modeling, data adequacy and higher level ofsimulation, the experimenter can design simulation experiments based on specificresearch questions, and obtain the data under different conditions through adjustingoperated parameters. In this paper, we use the genetic algorithms to simulate agent’slearning process to achieve the simulation of the securities issued by the company.Assuming that there are one firm which wants to issue securities and twoinvestors which will be able to buy the securities, and all of them having the ability ofinteractive learning, by constructing three agents who represent the firm and twoinvestors respectively, we attempt to explore with two-sided learning mechanism howdifferent dividend policies will affect firm’s financing preference, i.e., which kind ofsecurity does the firm prefer to issue.Results show that even in a perfect market, agents’ self-learning also eventuallylead to firm having a strong bias on selecting capital structure. This preference isconsistent with the empirical rule that can be observed, that is, companies are morewilling to choose debt financing. However, when a company uses a different dividendpolicy, the results demonstrated are different. Specifically speaking, with the adoptionof a fixed residual dividend policy and dividend payout ratio policy, bond is still theleading securities on the capital market, but with the adoption of a stable dividendpolicy or low normal dividend with additional shares dividend policy, stock becamethe highest frequency with which securities are issued by the firm, bond tend to beless issued.