Guided Cash Payout Policy and Firm Value: Evidence from China

Yin-Che Weng; Shiyu Liu; Yu Qi; Yadi Qin

doi:doi:10.11648/j.jfa.20160405.15

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Guided Cash Payout Policy and Firm Value: Evidence from China

Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin

Published in Journal of Finance and Accounting (Volume 4, Issue 5)

Received: 6 August 2016 Accepted: 22 August 2016 Published: 9 September 2016

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Abstract

This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.

Published in	Journal of Finance and Accounting (Volume 4, Issue 5)
DOI	10.11648/j.jfa.20160405.15
Page(s)	285-292
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Dividend, Payout Policy, Firm Value, China Market, Regulation

References

[1]	Fama, E. and French, K. (2001) Disappearing dividends: changing firm characteristics or lower propensity to pay? Journal of Financial Economics, 60, 3–43.
[2]	DeAngelo, H., DeAngelo, L. and Skinner, D. (2004) Are dividends disappearing? Dividend concentration and the consolidation of earnings, Journal of Financial Economics, 72, 425–456.
[3]	Baker, M. and Wurgler, J. (2004a) A catering theory of dividends, Journal of Finance, 59, 1125-1165.
[4]	Baker, M. and Wurgler, J. (2004b) Appearing and disappearing dividends: the link to catering Incentives, Journal of Financial Economics, 73, 271-288.
[5]	Kuo, J. M., Philip, D. and Zhang, Q. (2013) What drives the disappearing dividends phenomenon? Journal of Banking & Finance, 37, 3499-3514.
[6]	DeAngelo, H., DeAngelo, L. and Stulz, R. (2006) Dividend policy and the earned/contributed capital mix: a test of the lifecycle theory, Journal of Financial Economics, 81, 227–254.
[7]	Wang, F. Q. (2013) Cash dividends policy and enterprise life cycle: empirical research based on listed companies of China, The Theory and Practice of Finance and Economics, 34, 74-77.
[8]	Liu, Y. (2012) Empirical Study on the distribution of cash dividends of China listed companies: perspectives of life cycle theory, The Chinese Certified Public Accountant, 6, 97-101.
[9]	Liu, J. and Guo, X. (2009) Analysis of listing companies’ cash distribution policy. Friends of Accounting, 2009, 85-86.
[10]	Wooldridge, J. M. (2002) Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.

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APA Style

Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin. (2016). Guided Cash Payout Policy and Firm Value: Evidence from China. Journal of Finance and Accounting, 4(5), 285-292. https://doi.org/10.11648/j.jfa.20160405.15

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ACS Style

Yin-Che Weng; Shiyu Liu; Yu Qi; Yadi Qin. Guided Cash Payout Policy and Firm Value: Evidence from China. J. Finance Account. 2016, 4(5), 285-292. doi: 10.11648/j.jfa.20160405.15

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AMA Style

Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin. Guided Cash Payout Policy and Firm Value: Evidence from China. J Finance Account. 2016;4(5):285-292. doi: 10.11648/j.jfa.20160405.15

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@article{10.11648/j.jfa.20160405.15,
  author = {Yin-Che Weng and Shiyu Liu and Yu Qi and Yadi Qin},
  title = {Guided Cash Payout Policy and Firm Value: Evidence from China},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {5},
  pages = {285-292},
  doi = {10.11648/j.jfa.20160405.15},
  url = {https://doi.org/10.11648/j.jfa.20160405.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160405.15},
  abstract = {This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.},
 year = {2016}
}

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TY  - JOUR
T1  - Guided Cash Payout Policy and Firm Value: Evidence from China
AU  - Yin-Che Weng
AU  - Shiyu Liu
AU  - Yu Qi
AU  - Yadi Qin
Y1  - 2016/09/09
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160405.15
DO  - 10.11648/j.jfa.20160405.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 285
EP  - 292
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160405.15
AB  - This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.
VL  - 4
IS  - 5
ER  -

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Author Information

Yin-Che Weng

Department of Accounting, Harbin Institute of Technology, Harbin, P. R. China
Shiyu Liu

Department of Accounting, Harbin Institute of Technology, Harbin, P. R. China
Yu Qi

Department of Finance, University of Texas at Dallas, Richardson, USA
Yadi Qin

Department of Finance, Xiamen University, Xiamen, P. R. China

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Plain Text BibTeX RIS

APA Style

Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin. (2016). Guided Cash Payout Policy and Firm Value: Evidence from China. Journal of Finance and Accounting, 4(5), 285-292. https://doi.org/10.11648/j.jfa.20160405.15

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ACS Style

Yin-Che Weng; Shiyu Liu; Yu Qi; Yadi Qin. Guided Cash Payout Policy and Firm Value: Evidence from China. J. Finance Account. 2016, 4(5), 285-292. doi: 10.11648/j.jfa.20160405.15

Copy | Download

AMA Style

Yin-Che Weng, Shiyu Liu, Yu Qi, Yadi Qin. Guided Cash Payout Policy and Firm Value: Evidence from China. J Finance Account. 2016;4(5):285-292. doi: 10.11648/j.jfa.20160405.15

Copy | Download

@article{10.11648/j.jfa.20160405.15,
  author = {Yin-Che Weng and Shiyu Liu and Yu Qi and Yadi Qin},
  title = {Guided Cash Payout Policy and Firm Value: Evidence from China},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {5},
  pages = {285-292},
  doi = {10.11648/j.jfa.20160405.15},
  url = {https://doi.org/10.11648/j.jfa.20160405.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160405.15},
  abstract = {This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Guided Cash Payout Policy and Firm Value: Evidence from China
AU  - Yin-Che Weng
AU  - Shiyu Liu
AU  - Yu Qi
AU  - Yadi Qin
Y1  - 2016/09/09
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160405.15
DO  - 10.11648/j.jfa.20160405.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 285
EP  - 292
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160405.15
AB  - This study considers the “Guidelines for Cash Dividend Distribution of SSE-Listed Companies” (the “Guidelines”) issued by the Shanghai Stock Exchange (SSE) in January 2013 as an exogenous shock to corporate payout policy and assesses the effect of cash dividends on stock performance. The authorities believe that urging firms to pay out no less than 30% of their annual earnings is attractive to outside investors; however, the study results show that, whereas firms raising dividends to meet the level of payouts in the SSE’s “Guidelines” may gain superior valuation relative to the counterparts in the short term, this effect does not exist in the middle term. In addition, young, growing companies and startups that follow the policy suffer from downsized financial slack and future corporate investment levels. The results contribute to the literature on corporate payout policy and financial liberalization and indicate policy implications for the government of China and SSE-listed firms.
VL  - 4
IS  - 5
ER  -

Copy | Download