CAN MANDATORY DIVIDEND POLICY REDUCE THE AGENCY COST OF LISTED COMPANIES? MODEL ANALYSIS AND EMPIRICAL TEST IN CHINA

Abstract

In this research, the mixed strategy complete information static game was adopted to explain the effect of mandatory dividend policy on agency cost, and Chinese mandatory dividend policy introduced in 2011was regarded as the institutional background, and whether mandatory dividend policy can reduce the agency cost of listed companies as an accidental impact was studied. Empirical test indicates that mandatory dividend policy significantly inhibits the agency cost of enterprises. Further research finds that the mandatory dividend policy has a better effect on reducing agency costs for the companies listed on the main board and those with normal dividends, while it has no significant effect on restraining agency costs for the companies with micro-dividends and small and medium-sized boards. The study supports the dividend agency cost theory and provides empirical evidence for the regulating departments to improve the follow-up policy of capital market governance.

Keywords

• mandatory dividend
• agency cost
• dividend policy
• mixed strategy equilibrium
• difference-in-difference model