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Research about the relationship between corporate governance and dividend policy

Author: ChenLingLing From: www.yourpaper.net Posted: 2009-07-08 01:29:00 Read:
[Paper Keywords] corporate governance dividend policy agency costs
[Abstract] dividend policy and corporate governance are very important. Recent studies have noted the importance of corporate governance in the choice of dividend policy, corporate governance and dividend policy, the substitution effect. The study of the relationship between corporate governance and dividend policy review of the system, and evaluation of the inadequacies of the existing literature, provide the basis for the study of corporate governance and dividend policy.
Introduction
One of the three core content dividend policy as a modern corporate financial management, is a logical continuation of financing investment activities, is the inevitable result of the company's financial behavior, but also affect the share price, capital structure, and other important decisions. Reasonable dividend policy will be related to the stability and long-term development of the entire company. On the other hand, corporate governance is the most important part of the modern theory of the firm, the status of corporate governance to a large extent determine the operational status of the company, the company's actual operating process relatively sound corporate governance mechanism, the decision-making effect relatively good; Conversely, the effect is relatively poor.
In recent years, both domestic and foreign scholars on corporate governance or dividend policy carried out a lot of research. Recent studies noted that the relationship between corporate governance impact on dividend policy options and both, as Jensen & Meckling (1976); Easterbrook (1984) and so on. China's capital market as an emerging capital market, in many ways, with foreign different special particularity of corporate governance, such as a serious balance of the equity structure, the Government's administrative intervention, internal control problems, managers incentives and constraints mechanisms imperfect, lack of control over the market, so the study of the relationship between corporate governance and dividend policy, optimize the dividend policy for the promotion of the the Chinese dividend policy normalization process, and for the promotion of our dividend policy to further explore its great theoretical and practical significance.
Second, dividend policy and corporate governance relationship
Foreign scholars on both the research include:
Jensen & Meckling (1976) that the dividend policy will help to alleviate the agency conflicts between managers and shareholders, as well as between the shareholders and creditors. Easterbrook (1984) also considered dividends as an effective mechanism to reduce agency costs, the alternative of effective corporate governance mechanism.
Dividend policy and managerial ownership
Rozeff (1982) found that the ratio of dividend payout proportion with the management company holding shares in 1974-1980, negative correlation, and the company shares more scattered, the higher the payout ratio; Sornnate (1989) studies the management ownership ratio and the dividend payout ratio is positively correlated; George W. Fenn and Nellie Liang (2001) found that managerial ownership role in the company of high-agent problem was significantly and positively correlated with the dividend payment. They pointed out that managerial ownership can better align the interests of management and shareholders linked to dividend payment level higher.
Dividend policy and stock ownership concentration
Johnson et al (2000) based on hollowed assumption, that the ownership concentration will cause serious agency problem between large shareholders and minority shareholders, major shareholders tend to use their hands control over dividend policy to transfer resources from listed companies, which caused by the infringement of minority shareholders. Faccio, Lang and Young (2000) study shows that half of Western Europe and East Asia Business Group exist to varying degrees of outside shareholders controlling shareholders through dividend policy predatory. Ownership Concentration and dividend policy is relevant.
Chinese scholars based on this issue a lot of research:
372 Lv Changjiang, Wang Kemin (1999) paid cash dividends of listed companies in Shenzhen and Shanghai in 1996, 1997 and late 1998 for the sample, using the two-step method, drawn dividend distribution policy by the agency costs of China's listed companies, state-owned and Corporate controlling the extent of factors.
Chan Kwok-fai, Zhao Chunguang (2000) found that the Ownership Concentration has nothing to do with the dividend policy, weak state shares on the dividend policy.
Zhao Chunguang, Zhang Xueli, Ye Long (2001), studied in 1999, the Shanghai and Shenzhen stock markets select dividend policy motives, to discover whether the allocation of stock dividends and equity concentration, whether the allocation to cash dividends and asset-liability ratio.
Liao Li, Fang Fang (2004) found that managerial ownership has significantly improved high agency costs of the company's cash dividend payment. The impact of low agency costs dividends paid is not significant.
Xie Jun (2006) study found that China's market confirmed that the free cash flow theory, negate the "hollowing out" theory, that the largest shareholder is able to force the company to discharge excess free cash flow, and dividend adjusted growth opportunities policy.
The Shenli Jing, Chen Lianghua, Hongmei (2007) study found, Chairman of the Board and CEO of the listed company for the same, and the management of the proportion of board seats with the dividend payout ratio is negatively correlated positively related to the controlling shareholder and the dividend payout ratio.
Third, the existing literature review
Review of previous literature, I found a lot of research scholars of both made great achievements, but previous studies also found that there are still some shortcomings:
Whether around corporate governance dividend policy very much, but the combination of the two has not been studied mostly very scattered, mainly a study of corporate governance in terms of dividend policy options, no two system research.
2., Whether foreign or domestic, some conclusions on the relationship between corporate governance and dividend policy yet to form a consensus, such as managerial ownership, large shareholders, institutional investors holding the level of debt financing .
The following problems on empirical research methods - most studies using cross-sectional data for dynamic studies, using panel data studies; does not consider the endogenous system, two simultaneous perspective less; domestic scholars governance research firm on issues that affect the dividend policy choice, the lack of a profound analysis of Chinese special background.
References:
[1] Jensen, MC, Meckling, WH. "Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure" [J]. Journal of Finance, 1976, (3)
[2] Wang Kemin Changjiang Lv: An Empirical Analysis of the dividend policy of listed companies [J]. Economic Research, 1999, (12)
[3] Xie Jun: dividend policy, the largest shareholder and the company's growth of free cash flow theory or hollowed theory [J] Accounting Research, (4)
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