Agency Problem Of The Controlling Shareholder And The Life-Cycle Characteristic Of Dividend

Dividend policy,as one of the major financial decisions of listed companies,has been the focus of attention in academia.Compared with the development country,China's capital market development is lagging behind and investors can't be protected well.Listed companies have no significance to pay dividends to the outside small investors.What's more,a large number of listed companies with plenty of cash flow have never paid out any cash.Listed companies only financing through capital markets haven't paid any dividends,which not only influence resource allocation function of the capital market,but also strength the speculative consciousness of investors and prevent the healthy development of capital markets.In order to improve the current situation of dividend distribution of listed companies,scholars from home and abroad have done a lot of researches about the dividend distribution behavior of listed companies,but not conclusions have yet been made.Some empirical results are even contrary to the famous classic dividend theory.For instance,the agency problem suggests a negative relationship between the shareholding of controlling shareholder and the dividend payout.However,the empirical evidence of Chinese firms show a positive correlation.The situation is the same as the dividend life-cycle theory.In this case,this paper examines the agency problem of the controlling shareholder on the dividend life cycle characteristics.We hope to reasonably explain the dividend distribution behavior of listed companies in China.This paper first reviews the theory of dividend policy,finds out that scholars have put forward many opinions and hypotheses about the cash dividend payment under the background of China's special system.After considering the agency problem of the controlling shareholder,scholars suggest that the controlling shareholders has the motive of tunneling the interests of the company,and cash dividend has become one of the means for the controlling shareholder to seek personal profit.In addition,empirical tests of the dividend life cycle theory are also controversial for the sample selection and the regression method.Based on the limits of the existing research,this paper chooses the retained earnings/assets to measure the life cycle of company,and examines the applicability of the dividend life cycle theory in China.Furthermore,based on the background of the high concentration of the ownership structure of listed companies,we examine the effect of agency problem the controlling shareholder on the dividend life cycle characteristics of the company.On this basis,we examine the effect of cash dividend on the overinvestment of the company,and discuss the relationship between such effect and the maturity of the firm in the view of the controlling shareholder's agency problem.This paper finds that with the increase of company maturity,the dividend distribution of the company increases,and the dividend distribution is fit for characteristics of the life cycle.However,the existence of the controlling shareholder's agency problem has prevented the mature company from further improving the level of dividend payment,which weaks the company's dividend life cycle characteristics.After considering the controlling effect of cash dividends in overinvestment reducing,we find that although cash dividends helps to alleviate the overinvestment caused by free cash flow,the existence of the controlling shareholder's agency problem makes this effect less effective for mature companies.The results of this paper provide theoretical support for regulators to formulate dividend policy based on firm maturity,and show that the SFC should further consider the influence of the controlling shareholder in the formulation of dividend supervision policy.