An investigation of the information content of the financial policies of chinas listed companies 2

SZSE denotes Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange; Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the observati

TABLES

Table 1-1

Number of Listed Companies (1993-2004)

Source: China Securities and Futures Statistical Yearbook, edited by CSRC1 (2005)

Only A & H shares A & B shares

B-shares Only

Features of All A-share Firms (1993-2004)

Notes: Total Shares and Negotiable Shares are measured in 100 million shares; market

capitalization is measured in 100 million Yuan; Trading Volume is measured in million

shares Source: China Securities and Futures Statistical Yearbook, edited by CSRC (2005)

Negotiable shares

Negotiable market capitalization

Total Market Capitalization

Total Turnover

Trading Volume

Table 1-3

China’s Stock Market in the National Economy

Notes: The figures of GDP, Central Revenue, and the Amount of Stamp Duty are measured in

100 million Yuan

Source: China Securities and Futures Statistical Yearbook, edited by CSRC (2005)

Capitalization (%)

Negotiable Market Capitalization (%)

Central Revenue Amount Percentage

Table 2-1

Share Structure of All Listed Firms (1992-2004)

Notes: The figures are the number of shares as a percentage of outstanding shares,

which are computed through data from China Securities and Futures Statistical

Others Total A-shares B-shares H-shares Total

Table 2-2

Ownership Structure of Listed Companies (1993-2001)

Notes: In this table, the firms are divided into different groups according to their ownership structure The percentage figures are the proportion of firms that dominated by different type

of ownership, which are computed through data from the website www.cninfo.com.cn

YEAR Number of Firms

Dominated by State-owned Shares

Dominated by Legal Person’s Shares

Dominated by shares

A-Dominated by Non-negotiable Shares

Table 2-3

Ownership concentration in terms of a single shareholder

Notes: Figures are rearranged based on data from He (1998)

Percentage of Shares owned by the

Largest Shareholder Number of Firms Percentage of Firms

Cumulative Percentage

Overall Performance of Listed Companies (1992-2004)

Source: China Securities and Futures Statistical Yearbook, edited by CSRC (2005)

Year Debt Ratio (%) Net Asset

Per Share (Yuan) ROE (%) EPS (Yuan)

Table 2-6

Changes of Capital Structure of Listed Companies (1992-2002)

Table (A) presents the change in the amount for each type of shares over 1992 to 2002 The figures are calculated and rearranged based on the data from China Securities and Futures Statistical Yearbook (2003) The unit is 10,000 Yuan Table (B) presents the proportion of the change of each type of shares to the changes of total capital over 1992-2002

(A)

Seasoned Equity Issue Type of shares end of

1992 IPO

Stock dividend Rights

Issue

Public Issue

Other changes

end of 2002

State-owned Shares 29 2228.32 396.98 47.71 9.72 63.55 2774.78Sponsor's Legal Person's Shares 9.05 509.33 253.55 24.1 2.38 -111.49 686.45Foreign Legal Person's Shares 2.8 30.84 21.85 1.9 0.36 -4.49 53.26Private Placement of Legal Person's shares 6.49 127.03 114.79 13.37 -0.16 20.61 282.13

Changes IPO

Stock Dividend Rights

Issues

Public Issues Total

Others

Sponsor's Legal Person's Shares 677.87 75.1% 37.4% 3.6% 0.4% 3.9% -16.4%Foreign Legal Person's Shares 50.46 61.1% 43.3% 3.8% 0.7% 4.5% -8.9%Private Placement of Legal Person's shares 275.64 46.1% 41.6% 4.9% -0.1% 4.8% 7.5%

Table 2-7

A summary of A-share Firms Issuing New Shares (1994-2003)

Notes: The figures are calculated through data from www.cninfo.com.cn

Seasoned Equity Issues Rights issues Public Issues

YEAR

Number Proportion to

total firms Number

Proportion to Equity Issuing Firms

Number

Proportion to Equity Issuing firms

A summary of A-share Firms Paying Dividend (1994-2003)

Notes: The figures are calculated through data from www.cninfo.com.cn

Firms paying dividend Paying cash dividend Paying Stock dividend YEAR Total

Firms Number

Proportion

to total firms

Number

proportion

to dividend paying firms

Number

Proportion

to dividend paying firms

Table 2-9

Turnover Ratios of China’s Stock Market and Major World Markets

Notes: The turnover ratios of Shenzhen Securities Exchange (SZSE) or Shanghai Securities Exchange (SHSE), is defined as the ratio of the number of trading volume to the number of negotiable shares, and is collected from China Securities and Futures Statistical Yearbook (2005); the turnover ratios of the three major markets are collected from China Securities and Futures Statistical Yearbook, edited by CSRC (1999)

Turnover Ratio Year

Table 2-10

Number of A-share Investors (1990-2001)

Notes: The data are collected from Shenzhen Stock Exchange Fact Book 2001 and Shanghai Securities Exchange Statistical Yearbook 2002 The number of investors is measured at the end of each year in unit of 10, 000

Shenzhen Securities Exchange Shanghai Securities Exchange

Year

Total Individual Institution

Proportion ofIndividual Investors

Total Individual Institution

Proportion ofIndividual Investors

Table 4-1-1

Sample Description of Cash Dividend Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE

denotes Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange;

Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the

observations of cash dividend events The unit of cash dividend per share is Yuan

YEAR Mean Median Max Min Stdev Obs

Table 4-1-2

Sample Description of Pure Cash Dividend Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE

denotes Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange;

Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the

observations of cash dividend events The unit of cash dividend per share is Yuan

Table 4-1-3

Expected Results of Regression Models of Cash Dividends

Notes: CAR2 is the cumulative abnormal returns over days [0, +1]; CSH_GW is the current

annual growth of cash dividend; PS_CSH is the cash dividend per share; FUT_GWNII is the

annual growth of net income after the announcement; FUT_EPS is the earnings per share

after the announcement; FUT_CFASS is the ratio of net cash flow from operation to the total

assets; MTB is the market-to-book ratio before the announcement, which is computed as the

market value of the equity divided plus the total liabilities, divided by the total assets

Predicted Relationship with the Dependent Variable Hypothesis Explanatory Factors Explanatory Variables

CAR2 CSH_GW PS_CSH

4 Change of

6 Growth of Expected Earnings FUT_GWNII Positive

Table 4-2-1

Sample Description of Stock Dividend Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE

denotes Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange;

Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the

observations of cash dividend events The unit is number of stocks

YEAR Mean Median Max Min Stdev Obs

Sample Description of Pure Stock Dividend Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE denotes

Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange; Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the observations of cash

dividend events The unit is number of stocks

YEAR Mean Median Max Min Stdev Obs

Table 4-2-3

Expected Results of Regression Models of Stock Distributions

Notes: CAR2 is cumulative abnormal returns of days [0, +1]; PS_STK is the stock dividend

per share; PS_TRS is the transferred capital stock per share; FUT_EPS is the earnings per

share after the announcement; CSHBEF is a dummy which is equal to one if the firm paid

cash in the previous year and zero otherwise; MTB is the market-to-book ratio before the

announcement, which is computed as the market value of the equity divided by the book

value of the equity; CSHAFT is a dummy which is equal to one if cash dividend was paid

within one year after the announcement and zero otherwise; PEVT is the share price 10 day

prior to the announcement; EPS is earnings per share before the announcement; and LGKRV

is the amount of capital reserve before the announcement measured in natural logarithm

Predicted Relationship with the Dependent Variable Hypothesis Factors Explanatory Variables

CAR2 PS_STK PS_TRS

1 Size of Distribution

PS_STK

or PS_TRS

Positive

2 Expected

3 Dummy=1 if pay

5 Dummy=1 if pay

6 Price prior to

Table 4-3-1

Sample Description of Transfer Capital Stocks Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE denotes

Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange; Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the observations of cash

dividend events The unit is number of stocks

YEAR Mean Median Max Min Stdev Obs

Sample Description of Pure Transferred capital stocks Events (1994-2003)

Notes: The figures were calculated based on the data from www.cninfo.com.cn SZSE denotes

Shenzhen Securities Exchange and SHSE denotes Shanghai Securities Exchange; Stdev denotes the standard deviation of cash dividend per share; and Obs denotes the observations of cash

dividend events The unit is number of stocks

YEAR Mean Median Max Min Stdev Obs

Table 4-4-1

Sample Description of Pure Rights Issue Events (1994-2003)

Notes: The figures are calculated through the data from www.cninfo.com.cn Allocation ratio is

the number of rights per share; SZSE denotes Shenzhen Securities Exchange and SHSE denotes

Shanghai Securities Exchange; Average denotes the average stock dividend per share in Yuan;

Stdev denotes standard deviation of the distribution size; and Obs denotes the observations of

Transfer Capital Stocks events

Allocation Ratio (Number of rights per share)

Subscription Price (Yuan per share)

Table 4-4-2

Expected Results of Regression Models of Rights Issues

Notes: SIZE is defined as the dollar value of new equity raised under the rights issue divided

by the market value of the firm 10 day prior to the rights issue announcement date;

OFFPRICE is defined as the subscription price of rights issue price divided by the stock price

10 day prior to the issue announcement; MTB is defined as the market value of equity plus

book value of debt, divided by book value of total assets; RUNUP is defined as the

cumulative market return over the 60 days prior to the offering announcement day; MRUNUP

and defined as the cumulative market return over the 60 days prior to the offering

announcement day; SDVR is computed as the standard deviation of residual returns over the

60 days preceding the offering announcement

Predicted Relationship with the Dependent Variable

CAR2

2 The Relative

4 Preannouncement

5 Preannouncement

Table 5-1-1

Announcement Effect of Cash Dividend Events (1994-2003)

Notes: n is number of observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is the announcement day; CAR and AR denote the cumulative abnormal return and the abnormal return, and both are measured in percentage points; t-AR and t-CAR are t statistics for AR and CAR respectively; *, ** or *** indicates the significance level at 5%, 1% or 0.1%

OLS Model (n= 2329)

Table 5-1-2

Announcement Effect of Cash Dividend Changes (1994-2003)

Notes: This table presents the announcement effect of change in the cash dividend per share based on the OLS model; n is number of observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is the announcement day; CAR and AR denote the

cumulative abnormal return and the abnormal return, and both are measured in percentage points; t-AR and t-CAR are t statistics for AR and CAR respectively; *, ** or *** indicates the significance level at 5%, 1% or 0.1%

t AR(t) t-AR CAR(-10, t) AR(t) t-AR CAR(-10, t) AR(t) t-AR CAR(-10, t)-10 0.00 ( 0.00) 0.00 -0.04 (-0.47) -0.04 0.02 ( 0.33) 0.02 -9 -0.06 (-0.74) -0.06 0.04 ( 0.43) 0.00 -0.10 (-1.31) -0.07 -8 0.09 ( 1.11) 0.03 0.02 ( 0.28) 0.02 0.10 ( 1.34) 0.03 -7 0.06 ( 0.79) 0.09 0.03 ( 0.36) 0.05 -0.16* (-2.22) -0.14 -6 -0.08 (-1.00) 0.01 -0.07 (-0.85) -0.02 0.00 (-0.04) -0.14 -5 0.02 ( 0.28) 0.03 -0.04 (-0.52) -0.07 -0.04 (-0.52) -0.18 -4 0.05 ( 0.63) 0.08 -0.09 (-1.01) -0.15 0.00 (-0.06) -0.18 -3 -0.08 (-0.99) 0.01 -0.17* (-1.97) -0.32 0.00 ( 0.01) -0.18 -2 -0.06 (-0.79) -0.06 0.06 ( 0.74) -0.26 0.08 ( 1.10) -0.10 -1 -0.01 (-0.19) -0.07 0.04 ( 0.43) -0.22 0.01 ( 0.12) -0.09

[0, +1] 0.03 ( 0.31) 0.08 ( 0.70) 0.23* ( 2.20)

[-1, +1] 0.02 ( 0.15) 0.12 ( 0.82) 0.24 ( 1.87)

[-2, +2] -0.01 (-0.06) 0.22 ( 1.13) 0.40* ( 2.43)

Table 5-1-3

Announcement Effect of Cash Dividend Initiations and Resumptions (1994-2003)

Notes: The results are based on the OLS market model of events studies; Initiation means that

this is the first time that the company pays cash dividend; Resumption means that the

company pays cash dividend after at least one year’s discontinuity; n is number of

observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is

the announcement day; CAR and AR denote the cumulative abnormal return and the abnormal

return, and both are measured in percentage points; t-AR and t-CAR are t statistics for AR and

CAR respectively; *, ** or *** indicates the significance level at 5%, 1% or 0.1%

Table 5-1-4

Announcement Effect of Cash Dividends by Year

Notes: The results presented in this table are based on the OLS model; n is number of

observations; n is number of observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is the announcement day; AR denote the abnormal return, and is measured in percentage points;*, **, or *** indicates the significance level at 5%, 1%, or

0.1%

(n= 17) (n= 72) (n= 77) (n= 91) (n= 145) (n= 175) (n= 220) (n= 526) (n= 523) (n= 483)

t AR(t) -10 -0.22 -0.43 0.38 0.15 0.02 -0.15 0.00 0.01 -0.17** -0.16**-9 -0.10 -0.18 -0.69** -0.03 0.10 0.04 -0.24 0.01 0.02 -0.04-8 0.32 -0.10 0.22 0.42 0.04 0.09 0.14 0.08 0.01 0.02-7 -0.58 0.13 -0.07 0.04 0.00 0.09 -0.05 -0.07 -0.05 0.06-6 0.80 0.18 -0.12 -0.11 0.21 0.01 -0.11 0.12 -0.11 -0.05-5 0.06 -0.61* -0.18 0.32 0.31 0.34* 0.04 -0.02 -0.07 0.07-4 -0.05 0.42 0.16 -0.37 -0.23 -0.03 0.16 -0.06 0.03 0.11-3 -0.05 0.53* -0.07 -0.46 0.08 0.00 0.03 0.06 -0.03 0.04-2 -0.72 -0.28 -0.26 -0.04 0.12 0.19 0.24 0.00 -0.06 -0.01-1 1.48* 0.25 0.48* -0.06 0.20 -0.10 0.20 0.00 -0.05 0.01

Table 5-1-5

Announcement Effect of Cash Dividends by Period

Notes: The results presented in this table are based on the OLS model; n is number of

observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is

the announcement day; CAR and AR denote the cumulative abnormal return and the abnormal

return, and both are measured in percentage points; t-AR and t-CAR are t statistics for AR and

CAR respectively; *, **, or *** indicates the significance level at 5%, 1%, or 0.1%

Table 5-1-6

Statistical Description of Explanatory Variables in Regression Models of Cash Dividends

Notes: CSH_GW is the current annual growth of cash dividend; PS_CSH is the cash dividend

per share; GWNII is the annual growth of net income before the announcement; FUT_GWNII

is the annual growth of net income after the announcement; EPS is the earnings per share

before the announcement; FUT_EPS is the earnings per share after the announcement;

CFASS is the ratio of net cash flow from operation to the total assets before the

announcement; FUT_CFASS is the ratio of net cash flow from operation to the total assets

after the announcement; MTB is the market-to-book ratio at year end before the

announcement, which is computed as the market value of the equity divided by the book

value of equity; LGMV is measured as the logarithm of market capitalization at year end

before the announcement

Table 5-1-7

Cross-sectional Regressions of Cumulative Abnormal Return of Cash Dividends

Notes: CAR2 is the dependent variable which is the cumulative abnormal return of days [0,

+1]; CSH_GW is the current annual growth of cash dividend; PS_CSH is the cash dividend

per share; MTB is the market-to-book ratio at year end before the announcement, which is

computed as the market value of the equity divided by the book value of equity; LGMV is

measured as the logarithm of market capitalization at year end before the announcement;

PD00 is a dummy which is equal to one if the event occurred during 2000-2003 and zero

otherwise; CSH_00 is the multiplication of PS_CSH and PD00; MTB_00 is the multiplication

of MTB and PD00; CSHGW_00 is the multiplication of CSHGW and PD00; *, **, or ***

indicates the significance level at 5%, 1% or 0.1%

Table 5-1-8

Cross-sectional Regressions of Percentage Change in Cash Dividend Distribution Size

Notes: The dependent variable is CSH_GW is the percentage change in cash dividend distribution size; FUT_GWNII is the annual growth of net income after the announcement; GWNII is the annual growth of net income before the announcement; PD00 is a dummy which is equal to one if the event occurred during 2000-2003 and zero otherwise; GWNII_00

is the multiplication of GWNII and PD00; *, **, or *** indicates the significance level at 5%, 1% or 0.1%

Table 5-1-9

Cross-sectional Regressions of Cash Dividend Distribution Size

Notes: The dependent variable PS_CSH, which is the cash dividend per share; EPS is the earnings per share before the announcement; FUT_EPS is the earnings per share after the announcement; CFASS is the ratio of net cash flow from operation to the total assets before

the announcement; FUT_CFASS is the ratio of net cash flow from operation to the total assets

after the announcement; MTB is the market-to-book ratio at year end before the announcement, which is computed as the market value of the equity divided by the book value of equity; PD00 is a dummy which is equal to one if the event occurred during 2000-

2003 and zero otherwise; EPS_00 is the multiplication of EPS and PD00; FUTEPS_00 is the

multiplication of FUTEPS and PD00; CFASS_00 is the multiplication of CFASS and PD00;

FUTCFASS_00 is the multiplication of FUTCFASS and PD00; *, **, or *** indicates the

Table 5-2-1

Announcement Effect of Stock Dividends (1994-2003)

Notes: The table presents the announcement effect of Stock dividends by applying the three popular models; n is number of observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is the announcement day; CAR and AR denote the cumulative abnormal return and the abnormal return, and both are measured in percentage points; t-AR and t-CAR are t statistics for AR and CAR respectively; *, ** or *** indicates the

significance level at 5%, 1% or 0.1%

OLS Model (n= 350)

Table 5-2-2

Announcement Effect of Stock Dividends by Year

Notes: The results presented in this table are based on the OLS model n is number of

observations; n is number of observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is the announcement day; AR denotes the abnormal return, and is measured in percentage points; *, ** or *** indicates the significance level at 5%, 1% or

Table 5-2-3

Announcement of Stock Dividend by Period

Notes: The results presented in this table are based on the OLS model n is number of

observations; t, u or v denotes any single day within the event window [-10, +10], and t=0 is

the announcement day; CAR and AR denote the cumulative abnormal return and the

abnormal return, and both are measured in percentage points; t-AR and t-CAR are t statistics

for AR and CAR respectively; *, ** or *** indicates the significance level at 5%, 1% or 0.1%.

Table 5-2-4

Statistical Description of Explanatory Variables in Regression Models of Stock Dividend

Notes: PS_STK is the stock dividend per share; MTB is the market-to-book ratio before the

announcement, which is computed as the market value of the equity divided by the book

value of the equity; CSHBEF is a dummy which is equal to one if the firm paid cash in the

previous year and zero otherwise; CSHAFT is a dummy which is equal to one if cash

dividend was paid within one year after the announcement and zero otherwise; EPS is the

earnings per share before the announcement; FUT_EPS is the earnings per share after the

announcement; PEVT is the share price 10 day prior to the announcement; LGKRV is the

logarithm of capital reserve before the announcement