Research On The Impact Of Cross-listing On Firms’ Cash Dividend Policy

With the global economy increasingly integrated and the world financial controls gradually relaxed, the international capital flows more and more liberally. Different countries’ capital markets continue to ally in the development process. The phenomenon that companies come to cross list becomes more and more frequently. There are a total of 171 cross-listed companies of Chinese enterprises up to December 31, 2013. In addition there are 85 A+H cross-listed companies, 85 A+B cross-listed companies and 2 A+S cross-listed companies among them.This paper studies the impact of cross-listing on firms’ cash dividend policy from theoretical analysis and empirical test. Theoretically, from the multiple prospective of bonding effect and growth prospects, the article analyzes the impact of cross-listing on cash dividend policy and share a kind of conclusion that cross-listed companies tend to pay fewer cash dividends. Besides, considering the regulatory role of the ownership property between the cross-listed companies and the cash dividend policy, the paper presents a set of alternative hypothesis that performance hypothesis believes that the state-owned cross-listed enterprises tend to pay more cash dividends while private hypothesis supports that the state-owned cross-listed enterprises tend to pay fewer cash dividends. Empirically, the paper test the relationship between cross-listing and cash dividend policy based on the annual data(excluding the Shenzhen Stock Exchange GEM) of Chinese listed companies from 2007 to 2013. The results show that: Firstly, compared with non-cross-listed companies, cross-listed companies tend to pay fewer cash dividends, which means that relative to non-cross-listed companies, A+H and A+B cross-listed firms tend to pay fewer cash dividends, and compared with A+H and A+B cross-listed firms, multiple listed firms tend to pay fewer cash dividends. Secondly, the ownership property plays a regulatory role between the cross-listed companies and the cash dividend policy which means relative to state-owned non-cross-listed firms, state-owned cross-listed firms tend to pay more cash dividends.This paper argues that: Firstly, from the perspective of bonding effect, although the cross-listing significantly improve corporate governance and investors have more rights to force companies to issue more cash dividends, the motivation of agency problem that companies use higher cash dividend policy to alleviate will be relieved with the improvement of corporate governance. From the point of growth prospects, cross-listed firms’ executives can obtain more accurate and complete information from both domestic and international markets so that they can grasp the opportunities because overseas capital markets are more effective. When firms face a better opportunity, they are more likely to retain more internal funds so that they have sufficient funds to invest in the future, which results the fewer cash dividends. Secondly, the state-owned enterprises and the government has a natural relationship which shows the government will formulate various levels of policies to support state-owned enterprises. For example, compared with non-state-owned enterprises, state-owned enterprises which are more likely to enjoy preferential tax policies are more easily obtained larger scale and longer term bank loan. In addition, companies can make financing constraints in the capital market which can get a certain degree of ease by the way of cross-listing. In that way, the operating performance and the level of cash dividend can be improved.Finally, the article raises some reasonable suggestions about the cash dividend policy in China’s listed companies.