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Internal governance mechanisms and dividend policy in the new era of China's listed companies

Author: DiShaoHongˇˇBaiJun From: www.yourpaper.net Posted: 2009-08-05 14:03:19 Read:
Paper Keywords: listed on the dividend policy of the company internal governance mechanisms
Abstracts: In this paper, based on mature Western capital markets on the company's internal governance mechanisms and dividend policy analysis, Analysis of the correlation of the completion of the split share structure reform of listed companies in China's internal governance and dividend policy, which is the listed company develop a reasonable internal governance mechanism to provide a reference.


Introduction
Dividend policy on the company's profit after tax in dividends and internal distribution options in retirement benefits is an important financial decision-making in the company, is the result of the game between company stakeholders. Therefore, it will be subject to the influence of the internal corporate governance mechanisms, different internal governance mechanisms have different dividend policies. Dividend policy, on the other hand, depends on the internal state of governance, but by analyzing the dividend policy perspective of the state of governance of listed companies, the reasonable dividend policy will help to reduce or even eliminate the agency costs, managers try to maximize shareholder value as their guidelines for action. Appropriate dividend policy as a constraint mechanism effective coordinating agency relationship between shareholders and managers of the company, will help alleviate the problem and may even solve the corporate governance.
As the basis for corporate governance and ownership structure of the operation and efficiency of the internal corporate governance can produce an extremely important impact different dividend policy, governance structure under different shareholding structure. Correlation analysis on internal governance and dividend policy in China, almost all of the non-tradable share reform before 2005 shares and outstanding shares of the coexistence of different weights of the same shares, with shares of different prices, different shares Lee "conditions under Today, the share reform has been basically completed, after the share reform is almost blank. Equity situation in China after the share reform a qualitative change, all stock to achieve full circulation, all shareholders have the basis of common interests, the internal governance structure of listed companies in China will lead to important changes in dividend policy does make listed companies in China hair
Health changes? This article analyze thereon.

Second, foreign developed capital markets, internal corporate governance mechanisms and dividend policy correlation analysis
(A) ownership structure
Numerous studies show that ownership concentration to affect the dividend policy of the important factors. Dispersed ownership outside investors not know enough about the operating conditions of the company's high dividend payout ratio, according to the theory of dividends signal information that companies with good development situation can be passed to investors, companies generally tend to take a high dividend payout ratio; longer , said the agency costs, due to the lower proportion of individual shareholders, the company's monitoring costs is greater than its income, the general case, the shareholders do not have the power to supervise the company, and would rather reduce managers in the hands of high cash dividend The free cash flow to reduce agency costs. Ownership concentration, the comparative cost and revenue, controlling shareholder have power also have the ability of supervision, the company generally by major shareholders control the operation of the company, their company's financial situation compare to understand, so no need to through dividends to the outside world to pass information; Therefore, equity relative focused company, the dividend payment level is generally lower.
In Germany, first of all, the bank holds about 10% of the company's stock, so as to the identity of the largest shareholder participation in corporate governance; Furthermore, the Bank of minority shareholders stock custodian bank ", the exercise of the power of attorney on behalf of small and medium-sized shareholders. According to the German Stock Corporation Act, corporate voting power can not exceed 25%, and on behalf of the public shareholders of the bank's voting rights, but they do not limit the banks have a prominent role in the governance of listed companies. With the dual identity of the shareholders and creditors of the bank, have an incentive to have the ability to oversee the operations of listed companies, the supervisory role of the dividend policy is relatively small, so the dividend payment level is not high.
(B) The Board of Directors
As the most important corporate governance mechanism, the board of directors can have an important impact on managers, thereby affecting the dividend policy of listed companies. Listed companies in Germany, the implementation of a dual board system, including the Board of Governors and the Board of Supervisors, and the board of supervisors of a higher status than the Council. The board of supervisors have powers of appointment and removal of members of the Council, members of the Supervisory Board by the shareholders' representatives and trade unions on behalf of each half, supervisory board members can not serve as the equivalent to the role of the manager of the Council members, therefore strong supervisory role of the Board of Supervisors, to reduce agency costs. In addition, this mechanism is arranged to facilitate the transmission of information, and can effectively improve the efficiency of corporate governance, in contrast, dividend policy played governance efficiency is not high cash dividend payout ratios of listed companies in Germany.
(C) Debt Policy
Leverage effect of debt financing is conducive to a random act of restricting managers, to promote the interests of managers and shareholders, which helps to reduce agency costs. Excessive debt financing may make corporate cash flow shortfall, What is more likely to fall into crisis, in order to ensure the recovery of funds, banks usually limit corporate investment and dividend payout decision-making, and therefore the higher the balance, the The dividend payout ratio is lower. In Germany, the role of banks in corporate governance is important, the bank offers a variety of loans to the company, the company's asset-liability ratio of banks as creditors and shareholders to participate in corporate governance, although better implemented to maximize shareholder value target, but also limits the level of dividend payout.
Correlation analysis of the internal governance of listed companies in Germany and dividend policy, it can be found that the effect of ownership structure on dividend policy to develop throughout the ownership structure is fundamentally affect the dividend policy to develop. And we look at the dividend policy of the listed companies in Germany found that the lower the level of the dividend payment, but stable dividend policy, and cash dividends.

Now China's listed companies during the internal governance structure and dividend policy situation
(A) high concentration of shareholding
The split share structure reform to achieve full circulation of all stock, all shareholders have the basis of common interests. Stake in a decrease in the share reform program most of the price paid, the shareholding ratio changed to a certain extent, the major shareholder (the original non-tradable shareholders), the increase public shareholding ratio. 299 A-share listed companies of China in 2005 has completed the share reform, however, found that the proportion of these companies in 2006 the first of the major shareholding is still as high as 38.56%, remain highly concentrated ownership structure, that the company is still in control of the largest shareholder under, may make decisions in accordance with the will of the major shareholders.
(B) Board
invalid
Our board of directors is similar to Germany's dual board system, but with Chinese characteristics. Most of the members of the board of directors of listed companies in China are inside directors, chairman of part-time the widespread general manager, director of professional degree is not enough, and did not establish the concept of a professional manager, and former Senior Manager in the leadership of the department in charge of industry and industry ; followed due to the establishment of a short time, and are basically generated recommended by major shareholders and independent directors basically take orders from the major shareholders, the lack of independence of independent directors. In addition, the Board of Supervisors non-existent, the Board of Supervisors adopted the system of collective work, the Supervisory Board members can not work independently, would not achieve an effective supervisory role.
(C) asset-liability ratio is high, but the bank supervision invalid
High asset-liability ratio of China's listed companies, and the increasing trend in recent years 2003 and 2004, more than 45%, even up to 68.16% in 2006. However, as the largest creditor, bank involvement in corporate governance is restricted, and the bank itself is in the early stages of reform, internal governance is not perfect, and therefore weak supervision of listed companies.

Fourth, the dividend policy of listed companies in China
Through the above analysis, can be found in the internal governance of listed companies in China at this stage there are still many problems, and this corresponds to the dividend policy of listed companies in China in the formulation did not change much compared to before the share reform, the per share cash dividend 2004 year to 0.112 yuan, 0.095 yuan in 2006, and no significant change in dividend policy remains largely reflects the wishes of the controlling shareholder, rather than on the basis of the development of the company. (A) the dividend policy instability and lack of continuity
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