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Financing Payouts from Chinas Listed Companies——Expensive Game or Rational Choice

【Authors】
HU Jianxiong & MAO Ning
【WorkUnit】
HU Jianxiong (Nanjing University of Finance and Economics, 210000)MAO Ning (Nanjing University, 210000)
【Abstract】

Financing payouts refer to paying cash dividend from external financing, including debt financing and equity financing. Financing payouts challenge the traditional dividend theory which advocates that dividend of cash comes from free cash flow within corporations. But compared with internal financing, the cost of external financing is more expensive, which makes the behavior of financing payouts puzzling. This paper, taking A-share listed companies on Shanghai and Shenzhen stock exchanges from 2000 to 2016 for 17 consecutive years as research objects, confirms the universality of financing payouts from the perspective of the relevance of financial decisions. An index of dividend payout gap is constructed to measure the dependence of corporate dividends on external financing. The result shows that the increase in net debt and in net equity is key to filling the dividend payout gap. Additionally, the former contributes more. Also, financing payouts are sensible actions in consideration of relevance of financial decisions, rather than quick fixes. It helps companies adjust capital structure and stabilize cash reserves at the same time. The research conclusion expands the connotation of the traditional dividend theory, and has certain practical guiding significance for corporate executives, shareholders and regulators.

JEL: D21, G35

【KeyWords】
Financing Payouts, Cash Dividend Payouts, Dividend Payout Gap, Relevance of Financial Decisions