The Relationship Between Cash Dividend And Enterprise Value -based On Life Cycle Theory

The dividend policy is very important of the financial policies for listed companies. Correct selection of cash dividend policy is important for the promotion of enterprise value. The same enterprise will apply different cash dividend policy at different stages. This article is based on enterprise life-cycle theory and completes empirical test of the relationship between cash dividend distribution and the enterprise value. Using retained earnings equity (RE/TE) as the proxy variable of enterprise life cycle, with A-share listed companies as samples, selection of annual data from 2012 to 2014, the Logit model and multiple linear regression models were investigated whether to pay cash dividends of listed companies (cash dividend payment) and the rate of dividend distribution (cash dividend payments) whether has the characteristics of life cycle. At the same time, it discusses the relationship between cash dividends and the enterprise value in different life cycle.Research found that:(1) Whether paying cash dividends and the enterprise life cycle index were U correlated, and the rate of cash dividend distribution and the enterprise life cycle index also have U correlated relationship, so dividend of the life cycle theory can be used to study the dividend policy of listed companies. (2) Whether paying cash dividends is associated with the enterprise value, rate of cash dividend distribution is also related to the enterprise value, and the correlation is different with the change of the life cycle. The presentation is U-shaped relationship. In the company’s "initial" or "growth" period, cash dividends can make the enterprise value decrease; In the company’s "mature" or "recession" period, the accumulation of a large number of surplus and reduced investment opportunities are better suited to distribute cash dividend, and paying cash dividend can increase the value of the enterprise. (3) There is a positive correlation relationship between whether paying cash dividends and the enterprise scale, cash ability, corporate profits. It shows that the bigger the firm size, the greater the profit is the better. (4) There is a negative correlation between whether paying cash dividend and the growth ability and the asset-liability ratio, equity concentration.As the financial strategy and dividend policy is part of corporate strategies, it should be focused on how to enhance corporate value. It is suitable of the theory of MM. It should also be as one of the important measures of dividend policy. From the respective of the investors, the listed company can be combined by company’s stage of life cycle analysis, to determine the enterprise value of listed companies and to make reference for investment decisions.