Research On The Motives And Economic Consequences Of Hareon Solar's "high-send-transfer" Dividend Polic

Recently,the phenomenon of high stock dividend has attracted widespread attention among the Chinese security market.However,it is essentially being the internal structural adjustment of funds among shareholders ’rights and interests,that is,the retained earnings or capital reserve are transferred to become firms’ equity.In this case,the total book value of shareholders’ rights and the portions of shares held by each shareholder will remain unchanged after the transferring.Therefore,it basically has no impact on firms’ daily operation.On the basis of signaling theory,high stock dividend could be considered as a good signal for outside investors,indicating a promising future prospect of the firm.One thing should be noted is that China’s security market remains underdeveloped and operates under a strong speculative environment.Consequently,high stock dividend might severely hurt the interests of small and medium-sized investors since the issuance of high stock dividend dividend policy is generally accompanied by significant shareholding reduction of large shareholders-they obtain huge profits by cashing in their shares while the interests of small and medium-sized investors are seriously infringed.This paper begins with the introduction of the phenomenon of high stock dividend of Chinese listed firms,specifically describes the current situation and development of high stock dividend in terms of Chinese security market,and also analysis the motivations that underpin the adoption of high stock dividend tactic of Chinese listed companies.Then,this paper employs Hareon Solar as the case study to critical analysis the motivation and adverse economic consequences of its high stock dividend behavior in the circumstance when the company is suffering substantial income loss.Our case finds out that the abnormal yield rises sharply in a short period,alongside the strong market reaction to the company.The following reduction of shareholders and executives shareholding demonstrates above assumption,suggesting that large shareholders indeed obtain abnormal profits via high stock dividend behavior and undermine the interests of their counterpart.This case illustrates that there are many issues in the Chinese security market.Ergo,to reduce the large shareholders encroachment on the interests of small and medium-sized shareholders,it is necessary for listed companies to formulate a reasonable dividend distribution policy based on their own operation and development.Besides,small and medium-sized investors should enrich their professional knowledge,invest rationally and not blindly follow the trend of investment.More importantly,relevant regulatory authorities should strengthen the supervision and punishment to regulate the high stock dividend behavior of listed companies.