An Empirical Research on the Impact of Dividend Policy Disclosure on Company Stock Price

. This thesis uses the event study method and takes the A and B shares of the manufacturing industry in Shanghai and Shenzhen stock markets in 2019 as the research samples, and uses the market model to study the impact of the disclosure of cash dividend, mixed dividend and non-dividend policy on the stock price of the company. Study found that the announcement of the cash dividend policy did not cause the significant increase or decrease of stock prices. China's unique "semi-mandatory dividend policy" makes information conveyed by the disclosure of domestic cash dividend policy is different from the western scholars research and have it’s own new connotation. The "semi-mandatory dividend policy" makes it more difficult for investors to interpret the message of dividend policy and make rational decisions. At the same time ， it also makes the market reaction of dividend policy more complicated in the further study. The announcement of mixed dividend policy and non-dividend policy caused a significant rise in stock prices. The CAR (-2, 2) of the companies’ stock with non-dividend policy have the highest average. The results show that China's capital market is more keen on stock speculation. The "speculation" and "arbitrage" behavior of institutional or individual investors on stocks will have a certain impact on the stock price after the announcement of dividend policy. Based on the relevant conclusions of the empirical study and combined with China's relevant policies, his thesis makes an in-depth analysis of the reasons why the disclosure of cash dividend, mixed dividend and non-dividend policy affects the stock price.


Introduction 1.1 Research Background and Motivation
The three major decisions of the company's financial management include investment decisions, financing decisions, and dividend distribution decisions, of which dividend distribution is of great significance to the company's future development and the improvement of its value.Scholars have conducted in-depth research on the issue of dividend distribution, and many scholars in China have shown that China's stock market is not mature enough compared with west developed capital markets, and traditional research theories cannot explain some of the problems of Dividend Distribution in China's stock market, and China's capital market has its own uniqueness.Therefore, with the continuous improvement of China's stock market in recent years, the market environment has been changing with the passage of time, and the empirical research on issues related to dividend distribution still has certain practical significance.
Dividends are the return of money a company gives to investors, and the dividend policy will send positive or negative signals to investors.Western scholars believe that when the managers are very confident in the future development of their company, they will decided to increase dividends, and vice versa, it will reduce dividends, but whether this "signal transmission method" is suitable for China's capital market still needs further research and discussion.Based on the event study method, this paper will study the impact of the publish of cash dividends, mixed dividends, and non-dividend policies on stock prices, and explore the information connotation of these dividend policies.

Literature Review
The company's dividend policy has always been a hot topic of discussion in the field of finance and economics.In 1961 Miller and Mogliani, in their book Dividend Policy, Growth, and the event date of this study.According to the classification criteria of the 2012 edition of the CSRC Industry Classification, the manufacturing stocks of the Shanghai Stock Exchange and the Shenzhen Stock Exchange were selected as the analysis objects, and the samples were screened as follows: For the sake of continuity of the sample data, only companies listed before 2018 were selected as samples.Since the stock price in 2020 and 2021 will be generally affected by factors such as the epidemic, in order to eliminate this unstable factor, this article only studies the impact of dividend distribution events before 2019 on the stock price.Some of the listed companies distribute dividends twice a year.This paper excludes the second dividend distribution event and only selects the first dividend distribution event as a sample.Excluding the stock samples that also disclosed other major matters in the event window, other major matters include: mergers and acquisitions, litigation and arbitration, irregularities, private placements, and changes in the chairman of the board.Stocks of ST listed companies are excluded, as the financial situation of companies warned of the risk of delisting is usually unstable, and the movement of their stock prices is susceptible to a variety of factors.The mixed dividends involved in this article are the combination of distribution of cash and stock dividend or the transfer of reserve to common shares, That is, distribution of cash and shares, distribution of cash and transfer of reserve to common shares, distribution of cash and distribution of shares and transfer of reserve to common shares.
Finally, a total of 94 stocks were obtained as research samples (42 stocks listed on the Shenzhen Stock Exchange and 52 stocks listed on the Shanghai Stock Exchange), of which the sample size used to study the impact of cash dividend announcement disclosure on stock prices was 30.The sample size used to study the impact of mixed dividend announcement disclosure on stock price is 35; the sample size used to study the impact of mixed dividend announcement disclosure on stock price is 29.
All the research data in this paper come from the RESSET financial database and the CSMAR database.

Selection of Event Window
This paper studies whether the occurrence of the event of dividend policy disclosure has an impact on the stock price on the day and the period before and after the day.The longer the event period, the more likely it is to be disturbed by other factors.The window period is selected two days before the announcement date, because the market is not completely efficient, there may be a situation where inside information is leaked, at which point investors will have positive or bearish expectations for the stock, and investors' decisions based on their expectations may be reflected in advance in the fluctuations in the stock price; the window period is two days after the announcement date, because the announcement date of the dividend policy will have a certain impact on the stock price on the day of announcement date and the days after it, and the announcement date of the dividend policy will affect the stock price .The effects can last a long time.Therefore, the event window of this article is set to 2 days before and after the event day.

Selection of Event Window
The model used in this paper is a one-factor market model for a single security in arbitrage pricing theory: In the formula,   represents the actual rate of return of the i stock;   represents the market rate of return, which is calculated by the weighted average market rate of return on the market capitalization in this paper;   +     is the sum of the expected return of the stock and the market risk premium;   Represents the benefits from non-systemic risks associated with event announcements,the non-systemic risk in this paper is the risk brought about by the company's dividend announcement, so   represent the risk premium arising from the company's dividend announcement.
βi Beta coefficient, which refers to the degree of response of the i stock's return change to the market portfolio return change.The β value of the stock in this article is directly based on the RESSET financial database to provide the monthly return for the 12 months (Beta_12-month rolling) prior to the announcement ; i R means the expected return of the i stock, this paper selects the monthly actual holding rate of the company's stocks in the 12 months before the dividend announcement of each sample company, and calculates the average value i R ; M R represents the expected return of the market portfolio.In this paper, the average monthly market value-weighted market return of each sample company in the 12 months prior to the dividend announcement is selected and the average value M R is calculated.

Impact of Cash Dividend Announcements on Share Prices
After calculation, the calculation result of the standard deviation of the average Cumulative Abnormal Return of the sample stocks and the Cumulative Abnormal Return of the sample stocks in the 2 days before and after the cash dividend announcement date is as follows:  ,accept the null hypothesis of u = 0, the CAR caused by the announcement of the cash dividend policy in the sample is not significant at the significance level of 5%, that is, the release of the cash dividend policy did not cause a significant decline in the stock price Table 2. Descriptive statistics of the main variables (cash dividends) Note：*** ** * indicates that it is significant at the significance levels of 1%, 5%, and 10% respectively As can be seen from Table 2, the release of the cash dividend policy did not cause significant fluctuations in the stock price.
This may be due to the fact that investors prefer the "transfer" behavior of the company in anticipation of the company's good prospects, and they believe that holding more stocks during periods of relatively low stock prices can obtain capital gains by disposing of stocks after a sharp rise in stock prices in the next few years.Combined with the "semi-compulsory dividend policy" released by China in 2008, if an company wants to obtain refinancing qualifications, it must have accumulated profits distributed in cash in the past three years not less than 30% of the annual distributable profits realized in the past three years, which makes the issuance of "cash dividends" have its special connotation in China: It may indicate that the company lacks funds and hopes to raise funds through refinancing in the future, and the cash dividends issued at the moment are not to convey the signal of good company development, but only to "guarantee qualifications".This makes the stocks that choose the cash dividend policy not send "positive" news to the market, so after the release of the policy, investors are not very optimistic about the future development prospects of the stock, and the stock price has not risen significantly.

Impact of Mixed Dividend Announcements on Share Prices
After calculation, the standard deviation of the average CAR of the sample stocks and the CAR of the sample stocks in the 2 days before and after the mixed dividend announcement date is calculated as follows:  accept the null hypothesis of u = 0, the CAR caused by the announcement of the mixed dividend policy in the sample is not significant at the significance level of 5%, that is, the release of the mixed dividend policy does not cause a significant increase in the stock price.As can be seen from Table 3, the stock price showed an upward at a significant level of 5% on the day before the release of the mixed dividend policy, and on the first day after the release of the mixed dividend policy, the stock price also rose significantly at the significant level of 5%.This suggests that the disclosure of the mixed dividend policy will increase stock prices, there is a "signaling effect" in China's capital market, and Chinese investors are optimistic about the message conveyed by the decision of companies to implement a mixed dividend policy.At present, China's capital market is more keen on stock speculation, investors will pay close attention to the dividend distribution announcement of high stock dividend, and buy before the record date or after the exdividend in order to earn excess returns when the stock price rises.This irrational phenomenon of "buying low and selling high" in order to obtain excess returns is very widespread in China, and some investors buy stocks not for value investment, but for short-term speculation.
At the same time, the stock price rose significantly the day before the release of the mixed dividend policy, which indicates that there is information leakage in China's capital market, that is, investors have this information and make corresponding decisions the day before the announcement date of the dividend plan, which shows that China's capital market is not a strong and effective capital market.

Impact of Non-dividend Announcements on Share Prices
After calculation, the standard deviation of the average CAR of the sample stocks and the CAR of the sample stocks in the 2 days before and after the non-dividend announcement date is calculated as follows: qualification of "refinancing", reflecting that except for some insolvent and financially troubled companies, most of these companies can maintain operations and reinvestment only by internal financing.They do not need to meet capital needs through stock market financing, and have strong economic strength.Institutional investors or individuals engaged in arbitrage activities are more inclined to analyze the fundamental information of the companies, look for stocks that are seriously undervalued to buy in large quantities, and then sell them when the stock price rises to its normal or higher level, so as to make a profit, such investors are less about whether their target companies pay dividends, and they pay more attention to the fundamentals and future development prospects of the companies (most companies that pay non-dividend policies have better future development prospects in china).With the purchase of the stock of its target company by institutional or individual investors who carry out arbitrage activities, according to supply and demand, the price of the stock in the market will inevitably rise or even exceed its actual value, so that the holder obtains excess returns.
Therefore, the signal that "companies do not distribute dividends" may convey to investors information such as strong financial strength, good investment opportunities and development prospects, and the value of stocks may be underestimated, thus prompting investors to buy stocks, resulting in a significant increase in the stock price of the company on the second day after the release of the non-distribution policy.

Conclusion
The relevant research on the impact of dividend distribution policy on stock price provides corresponding guidance for Chinese listed companies to formulate dividend policies that are conducive to their own development.With the continuous improvement and development of China's capital market and the release of corresponding national policies, the internal mechanism of dividend policy on stock prices is constantly changing.This paper explores the impact of cash dividends, mixed dividends, and non-dividend policies on the stock price of companies through the event research method (due to the small number of companies that simply issue stock dividends, this article will not discuss), The conclusion shows that the release of the cash dividend policy has not caused a significant increase or decrease in stock prices, and China's unique "semi-compulsory dividend policy" makes the information conveyed by the disclosure of China's cash dividend policy have a new connotation different from the conclusions of Western scholars.The release of the Mixed Dividend Policy and the Non-Dividend Policy caused a significant increase in the stock price, and the average CAR(-2,2) of the shares of companies that release the Non-Dividend Policy was the highest.
At the same time, there are some deficiencies in the research, because this paper only selects a total of 94 stocks in the Manufacturing industry of the Shanghai and Shenzhen markets as a research sample, due to the small sample and concentrated in one industry, the research conclusions have contingency, and this paper only explores the short-term impact of dividend policy disclosure on stock prices, and does not conduct relevant research on the long-term impact of events on stocks.It is hoped that the sample size will be increased in subsequent studies and the event window will be lengthened to explore the long-term reaction of the disclosure of dividend policies to the impact of

N
0.0419 0.0182 0.0570 -0.0462 00212 0.0050 -0.0247 0.0166 0.0097 -0.0146The CAR of the sample stocks over the window period( )The standard deviation of the CAR of the sample stock over the window period

Table 1 .
Standard deviation and T-statistic calculation table for stocks paying cash dividends during the event window period

Table 3 .
Standard deviation and T-statistic calculation table for stocks paying mixed dividends during the event window period

Table 4 .
Descriptive statistics of the main variables (mixed dividends)

Table 6 .
Descriptive statistics of the main variables (non-dividend)