Does Mandatory Dividend Smoothing Reduce or Increase the Leverage Ratio? Evidence from the Differentiated Dividend Regulatory Policy
- HAN Yun，ZHANG Yun & LYU Qian
- HAN Yun，ZHANG Yun(School of Finance, Shanghai Lixin University of Accounting and Finance，201209)LYU Qian(School of Management, South-Central University for Nationalities, 430074)
From the perspective of linkage between supply-side structural reform and corporate financial decision, this paper explores the effects of dividend smoothing on the leverage ratio and on the deviation of capital structure against the background of differentiated dividend regulatory policy. Our study on the economic consequences of dividend smoothing shows that a higher dividend ratio of China's listed firms can reduce the leverage ratio and alleviate capital structure deviation, but a continued high-level dividend ratio increases the leverage ratio and aggravates the deviation of actual debt ratio from target capital. Our research on debt adjusting mechanism reveals that enhanced dividend smoothing induces new dividend payment upon equity refinancing and equity pledge refinancing, and corporate maturity, difference of debt level, low shareholding percentage of the controlling shareholder, state-ownership and low-level separation of ownership and management are important factors that intensify the influence of dividend smoothing on financing behaviors. With propensity score matching to evaluate the dividend regulatory policy, we find that differentiated payment regulatory policy reduces leverage, promotes equity pledge refinancing and alleviates the effects of dividend smoothing on financing decisions and the dynamic adjustment of capital structure. Our research shows that the implementation of differentiated payment regulatory policy relieves the restraining effects of enhanced dividend smoothing on financing, and provides new evidence about the crossing effects of corporate behavior and innovation of financial regulation.
JEL：D21, G32, G35
- Dividend Smoothing, Leverage, Deviation form Target Capital Structure, Differentiated Dividend Supervision Policy