An Empirical Study On GEM Listed Companies’ Dividend Policy And Investment Efficiency

The listed company’s investment activity is not only the source of creation of enterprise value but also an important guarantee for the company’s future survival and development. However, the non-efficiency phenomenon of listed company’s investment in China are quite common, the presence of over-investment and under-investment reduces the efficiency of resource allocation. Consequently, a large number of research has shown that the dividend policy can ease the agency conflicts and transmit signal, playing a managerial role for companies in advancing investment efficiency. As a result of the imperfection of China’s capital market, the conflict between stockholders and managers, information asymmetry and other factors, there are significant differences from Western countries in dividend policy and its impact on the efficiency of investment. GEM, as an emerging capital market, has a rapid development after its inception. Up to August of 2015, China has had 484 companies listed in the Shenzhen Stock Exchange market, and how are their investment efficiency? How dividend policy impact on the efficiency of investment? Therefore, this paper makes applied research on how the GEM listed companies’ dividend policies affect their efficiency of investment, hoping to provide a basis for GEM listed companies to improve the status of their investment and promote investment efficiency based on a theoretical and empirical analysis.This paper reviews and summarizes the relevant literature and the theory of dividend policy and investment, examining the status quo of dividend allocation and investment of companies listed on GEM as a whole, and then measures the company’s non-efficiency investment level by improving the Richardson model, Selecting 2010--2014 data sample of 355 companies on GEM. By constructing regression model, the influence of the dividend policy on investment efficiency can be examined. The empirical results show: 1) Although the GEM listed companies investment rate is high, but the overall efficiency of investment has not been a corresponding increase, especially under-investment widely exists. 2) The more Free cash flow, over-investment is more serious, and the greater free cash flow gap, the more serious under-investment. 3) Dividend policy of GEM listed company, to a certain extent, can affect the non-efficiency of investment, but the impact on over-investment of listed companies is not significant, by contrast, restrains the phenomenon of under-investment. We can see from this article, dividend policy has not played a full role in supervising and constraints. Finally, based on the summary of the full research, suggestions are advanced on how to improve the efficiency of investment which has important implications for GEM listed companies to improve corporate governance, and then the paper notes the lack of research that exists and the prospects for further follow-up study.