Dividend Payouts And Agency Costs

Based on the property right theory and free cash flow theory, this paper combined with cash dividend policy and SOE dividend policy, listing income distribution policy, over-investment and perquisite consumption into a unified analytical framework. This paper theoretically analyzed the impact of dividend payouts on over-investment and perquisite consumption, and using data sample of listed companies in China from 2010 to 2013 with panel data regression method, empirical testing the impact of cash dividends on listed companies' agency costs.Due to the separation of ownership and management, the study found that the modern enterprise leading to a conflict between management and shareholders. Reflected in the agency cost problem, that is, when the corporate governance system cannot compensate management's operating results and incentives, will lead the management of opportunistic behavior, namely management to take a more subtle means such as over-investment and perquisite consumption for their own personal gain. In our existing cash dividend policy and dividend policy of the state-owned listed companies, the dividend ratio of listed companies is still very low; a lot of free cash flow can be used by management, reducing agent efficiency.Through empirical studies, we found that dividend payouts have a negative correlation with over-investment and perquisite consumption, namely dividend payouts restricted the internal management of listed companies engaged in the use of discretionary cash, which is available for over-investment and perquisite consumption. Dividend payouts weakened the control of management to free cash flow, and funds obtained through external sources is under the regulation of investors, regulators and other regulatory aspects, difficult to use for personal gain management. But compared to the perquisite consumption, the inhibitory effect of over-investment is weaker. Further analysis found that the company's free cash flow and overinvestment is significantly correlated, but the balance rate and over-investment levels negatively correlated. Descripting to some extent free cash flow determine the level of over-investment, but the existing semi-mandatory cash dividend cash dividend policy has resulted efficiently reduce the level of free cash flow, so the rate of increase of corporate assets and liabilities at the same time, constraints cash dividend policy inhibitory effect on agency costs.Through comparative analysis between samples, we found that the inhibitory effect of over-investment and perquisite consumption is more effect in state control over non-state-owned enterprises samples. This shows that in the case of current resources, policies are tilted higher degree of supervision in control of the stateowned enterprises; the dividend payouts can effectively inhibit the agency costs, and improve treatment effect.This study for understanding the impact of the listed company's cash dividend policy effect has a certain sense of corporate governance, as well as how to optimizing the distribution of the listed company's interests, improving agent productivity and efficiency of corporate governance provides a useful perspective.