Research On The Motivation And Economic Effects Of High Cash Dividend Of Family Enterprise

As the backbone of the non-public ownership economy,family businesses play an important role in the development of the modern economic system.For more than forty years of reform and opening up,China’s non-public ownership economy has achieved fast progress,and Chinese family companies have continued to diversify.The business management model of family companies is more mature,and economic strength is also increasing.Due to its unique equity structure and governance model,family businesses have always been the focused study object of domestic and foreign scholars,and the dividend policy of family business is also a matter of focusing on some scholars.With the constant and rapid development of China’s economy,the China Securities Regulatory Commission has released a collection of public corporations’ dividend supervision policies for many enterprises with the ability to dividends but has a long-term independent dividends to promote dividends of public companies.The implementation of the regulatory policy has indeed played a positive role in the dividends of listed companies,rising the number of dividend companies,and rising the dividend level of public corporations.However,as dividends have become an important means of returning investors in public corporations,it has also become a way for many public corporations to transport benefits.The movement behind the high cash dividend phenomenon and the existing problems have become hot spots for many scholars.Scholars try to discover the corporate value related information behind the dividend by analyzing the dividend’s motivation.This paper choose Gongniu Group Co.,Ltd.as a case study object.Gongniu Group is a typical family company,with high equity concentration and long-term high cash distribution.This article analyzes the motivation and economic effects of the Gongniu Group’s high cash distribution by comprehensively using literature research method,case research method,comparative analysis method,and event research method.First of all,review the relevant literature of high dividend’s motivation and economic effects.Then based on the theory of proxy theory,the motives of Gongniu Group’s long-term high cash distribution were analyzed from four perspectives:the special governance model,capital situation,internal agency cost of the family members and the maximization of family interests.Expound the economic effects of Gongniu Group’s long-term high cash distribution from 3 aspects:market response,long-term development and investment and financing.Finally,relevant conclusions are drawn and targeted suggestions are put forward.Through the analysis and research,this paper mainly come to the following findings:First,it is about the motivation of high cash dividend.Gongniu Group’s has a relatively special governance model with highly concentrated equity and long-term senior executive tenure,which makes the control of Gongniu Group firmly in the hands of the two brothers Ruan Liping and Ruan Xueping,which lays a decision-making foundation for long-term high-cash dividend distribution;The continuous accumulation of surplus makes the monetary funds continue to grow,and the surplus funds are generated under the condition that the investment demand of Gongniu Group is small,which provides a material guarantee for the distribution of high dividends,and high cash distribution can also achieve the purpose of avoiding the abuse of funds,reducing agency costs and giving back to shareholders to a certain extent;Family members can also obtain higher returns under the high dividend policy,so as to reduce the cost of agency within the family;The high cash dividend amount and dividend payment ratio before the listing of Gongniu Group are higher than the level after listing,and the equity before listing is not diluted by public shares can make family members obtain higher benefits,and through high cash dividend distribution,it can continue to bring benefits to family members without reducing control,so as to maximize family interests.The second is about the economic consequences of high distribution.The market response of Gongniu Group’s high payout was relatively positive;The level of R&D investment is slightly higher than the average of comparable companies,the financial indicators reflect the overall financial situation of Gongniu Group,and the high dividend distribution does not have a greater unfavorable effect on the long-term development of the corporation;Gongniu Group is in the mature stage,there are fewer investment opportunities and less surplus funds,and the high dividend distribution does not limit the investment and financing situation of enterprises,but the overall utilization rate of funds is low,which reduces the return on net assets.The second is about the economic consequences of high distribution.The market response of Gongniu Group’s high payout was relatively positive;The level of R&D investment is slightly higher than the average of comparable companies,and the good financial indicators reflect the overall financial situation of Gongniu Group,so the high dividend distribution has not had a greater negative impact on the sustainable development of the enterprise;Gongniu Group is in the mature stage with fewer investment opportunities,more surplus funds and less financing needs,so the high dividend distribution does not limit the investment and financing situation of enterprises,but the overall utilization rate of funds is low,resulting in a decrease in the return on net assets;Gongniu Group’s continued high dividend dividend did not have a serious negative impact on the company’s value,and in the case of comparable companies in the same industry and the industry as a whole Tobin Q value showed different declines,Gongniu Group’s Tobin Q value decline trend relatively slowly,reflecting that its high dividend distribution is to a certain extent to improve the company’s value.By analyzing the motives and economic consequences of Gongniu Group’s high distribution and putting forward targeted countermeasures and suggestions,this paper provides reference suggestions for the better development of Gongniu Group,and provides reference for family enterprises in improving dividend distribution policies and promoting sustainable development and other operations and governance of enterprises.