Research On Corporate Cash Dividends Driven By Employee Stock Ownership

Dividend policy is an important financial decision of listed companies,and cash dividend is the most important way of dividend distribution,which has always been the focus of research.Employee stock ownership is a mechanism by which employees within a company hold their own stock or option and benefit from it.This paper studies the cash dividends of Wanhua Chemical for a long time,and finds that the company has two important turning points in 2007 and 2017,and its cash dividends have changed from a lower level to a higher level and an ultra-high level.It is found that the change of the company’s cash dividend policy is driven by three changes in the employee stock ownership.This article selects Wanhua Chemical as the research object,which has certain reference significance for the formulation of cash dividend policies of similar types of companies,and will also provide reference for the formulation of related policies.Through the method of case study,this paper deeply analyzes the reasons why the company raises the cash dividend level under the three processes of management indirect stock holding,employee indirect stock holding and employee direct stock holding.The management of the company and the group realized the management’s indirect holding in late 2006,and the listed company raised the level of cash dividends in 2007.In another way,another employee shareholding platform established in 2005 named Zhong Kaixin,which held shares in Ningbo Wanhua,a subsidiary of Wanhua.Ningbo Wanhua has paid a large amount of cash dividends every year to compensate and motivate these employees.Wanhua Chemical conducted employee indirect shareholding in 2013.Its employee shareholding platform,Zhong kaixin held the parent company through the asset injection.In the background of the company’s lack of capital,the company maintained a higher level of dividends while the company had a large amount of long-term loans.Wanhua Chemical started its consolidation by merger from 2017,and through directional additional issuance to realize the overall listing,the two major employee shareholding platforms directly held the shares of the listed company,the ownership structure was more transparent and reasonable,and the cash dividend level was increased again in Wanhua Chemical in 2017.It maintained an ultra-high cash dividend level in 2018,and was on the front line of the entire A-share market.Through the research in this paper,the following conclusions are obtained:(1)While continuously optimizing the shareholding structure through employee shareholding,Wanhua Chemical has also formulated a cash dividend policy suitable for the shareholding structure and used dividends to encourage employees.(2)In terms of the impact of the implementation of the cash dividend policy on enterprises,Wanhua Chemical’s increasing in the cash dividend level in 2007 and the borrowing money to pay dividend in 2013 caused the company’s solvency and free cash flow indicators to deteriorate significantly,but after 2017,the company’s solvency has not deteriorated,and free cash flow has been guaranteed;due to sufficient incentives,management is more inclined to invest in favor of the company’s longterm interests;due to the increase in dividends to the company actual controller—Yantai SASAC,the local government will give huge government subsidies according to the company’s operating conditions.In terms of market response,the increase in cash dividends caused by three changes in the shareholding of Wanhua Chemical’s employees has not been welcomed by investors in the short term.The innovations of this article are that: in terms of case selection,the change of Wanhua Chemical’s cash dividend policy is not unfounded and driven by the employee’s shareholding process.The case is unique and typical,and it provides a new perspective for studying on corporate cash dividend policy;There are many methods in the existing research to evaluate the impacts and market responses of a certain event to the company.This article develops a targeted evaluation system for the specific case to evaluate the impacts of Wanhua Chemical ’s cash dividend level driven by employee shareholding from multiple perspectives.