Essays on Corporate Dividend Policy: Chinese Evidence

The thesis examines the dividend puzzle in the context of the Chinese capital market and further investigates the factors that significantly affect dividend policy in Chinese listed firms. In Chapter two, we examine the announcement effects of dividends in the Chinese capital market, with an emphasis on stock dividends. We begin by separately investigating the cumulative abnormal returns around the announcements of cash, stock and combined dividends. Because earnings are announced concurrently with dividend decisions in China, and therefore the estimated abnormal returns could be confounded by the earnings effect, we attempt to examine the dividend announcement effect under different earnings signals. We find a strong announcement effect of stock dividends even after controlling for concurrent earnings surprises. In contrast, pure cash dividend stocks experience no significant price run-up around the announcements. In addition, we examine the difference in market reactions to a positive or negative earnings announcement as firms initiate, maintain or switch to different forms of payouts. It appears that switching from other types of dividends to stock dividends reinforces the earnings signal. Chapter three examines the effect of corporate governance and stock liquidity on corporate payou