DISSERTATION PROPOSAL FORM
Submission Date: 26.02.2010
Part 1: Some Personal Information
Your Name: Zhao Chunying
Your email address: [email protected]
A phone number:
07575078728
Part 2: Topic area, key literature and conceptual development
代写英国硕士论文2a: What is the proposed title of your research?
Factors Affecting Retail Investors' Preferences on cash and stock Dividends Payout in China.
2b: What general areas of research does your topic cover?
The main objective of this research is to explore the current research by investigating factors influencing retail investors' preferences on dividends payouts in China. More specifically, the paper will examine the impact of two contradicting factors: tax and agency cost concerns on retail shareholders' preferences.
Dividend policy , as one of the three core components of corporate finance, has been the subject of much research in the last few decades. Generally, the subject was studied from two main research lines: motives for dividend policy and market reaction to dividend policy (Li et al, 2009).
In the last five decades, there has been a sustained academic interest in examining the motives for dividend decisions (Li et al., 2009; Wei and Xiao, 2009; Guo and Ni, 2008;). There is a general agreement among researchers that investors' preference is one main determinant and motive for companies' dividends decisions. More specifically, Baker. and Wurgler (2004) provided evidence that dividend decision can be interpreted from the perspective of catering theory. That is managers tend to initiate dividends when investors demand for dividend payers increase and tend to omit dividends when investors prefer non-payers.
Shareholders' preferences -as a determinant of dividend policy- and factors influencing their preferences have been investigated from different angles. For instance, some research focused on agency problem and found a relationship between shareholders' legal rights and dividends preference (Jiraporan and Ning, 2006; La Porta et al., 2000). others focused on other factors such as age, level of income and tax incentives (Graham and Kumar, 2006).
If shareholders' preferences for dividends is explained from agency theory point of view, it is expected that retail investors would prefer cash dividends over stock dividends. That is since retail investors have no control over managers' behaviour and have no information on the profitability of future projects and investments, they prefer to restrict managers' undesired behaviour by reducing the available cash (Li and Huang, 2006).
By examining agency theory and dividend policy in 33 countries, La Porta, et al.,(2000) found that investors preferences vary based on the strength of the legal rights of investors. For instance, it was found that legally protected shareholders are willing to wait for their dividends when investment opportunities are good and consequently they may not prefer cash dividends in such situations. On the other hand, they found that poorly protected shareholders prefer to take as much as possible cash dividends regardless of investment opportunities.
However, since tax regulations in China differentiate between dividends and capital gains, tax incentives may influence investors' preferences. Cash dividend is subject to 20% tax rate whereas capita /gains are tax free in China (Wei and Xiao, 2009). Consequently, if tax was the concern of investors, it is expected that investors would prefer stock dividends over cash dividends. Hence, it is assumed that agency theory and tax are adversely related in terms of their impact on investors choice for cash and stock dividends.
Guo and Ni(2008) found that the firms with higher institutional investors are more likely to pay dividends where tax advantage is highly associated with institutional preference for cash dividends. Furthermore, Wei and Xiao (2009) investigated investors preferences for cash and stock dividends in China and found that stock dividend is positively associated with the proportion of publicly tradable shares. Tax consideration was among the reasons for this positive relationship (Wei and Xiao, 2009). Graham and Kumar (2006) found that tax is a major concern for young investors and a minor concern for old investors. Investors preference was found to be influenced when tax is a major concern.
Since tax and agency problem may play a contradicting role in influencing retail investors' preferences for cash and stock dividends, this paper aims at examining the impact of these factors on retail investors in China. Furthermore, this paper aims at investigating circumstances upon which tax and/or agency problem becomes a major concern for retail investors.
2c: What are the key readings for your research?
Baker, M. and Wurgler, J., 2004. A Catering Theory of Dividends. The Journal of Finance, 59, pp. 1125-1165.
Graham, J.R. and Kumar, A., 2006. Do Dividend Clientles Exist? Evidence on Dividend Preferences of Retail Investors. Journal of Finance, 61, pp. 1305-1336.
Guo, W. and Ni, J., 2008. Institutional Ownership and Firm's Dividend Policy. Corporate Ownership & Control, 5(2), pp. 128-136.
Jiraporan, P. and Ning, Y., 2006. Dividend Policy, Shareholder Rights and Corporate Governance. Journal of Applied Finance,16(2), pp. 24-36.
La Porta, R., Lopez-De-Silanez,F., Shleifer, A. and Vishny, R.,W., 2000. Agency Problems and Dividend Policies around the World. The Journal of Finance, 55 (1), pp. 1-33.
Li, L., Yin-feng, Q., Song, L., and Man-shu, W., 2009. Who Makes the Dividend Policy Drcision and Their Motives for Doing So: An analysis based on a questionnaire survey of non-stste-owned listed companies in China. Available from: http://www.docstoc.com/docs/19905357/ [Accessed on 10/02/2010].
Li, Q. and Huang, G., 2006. Influence of Institutional Ownership on Cash Dividend Policy of China Listed Companies. Available from: http://it.swufe.edu.cn/UploadFile/other/xsjl/sixwuhan/Paper/IF053.pdf [Accessed on 10/02/2010].
Wei, G. and Xiao, J.Z., 2009. Equity Ownership Segregation, Shareholder Preferences, and Dividend Policy in China. British Accounting The Review, 41, pp. 169-183.
Part 3: Research questions
3a: What are your research questions likely to be?
This research will examine the following hypotheses:
H1: Long term investors' preference for dividends is influenced by agency cost.
H2: Short-term investors' preference for dividend is influenced by tax.
H3: Long term investors prefer cash dividends over stock dividends.
H4: Short term investors prefer stock dividends over cash dividends.
Part 4: Research design
4a: Methodology
This research aims at examining dividends preferences from the perspectives of retail investors in China. Motivated by the fact that most of the previous research based on sole formal public data, this research will be based on firsthand questionnaire data. Consequently, primary data will be collected through a questionnaire targeting 200 retail investors directly. The questionnaire will be developed after a comprehensive literature review for the previous research in this field. Moreover, an extensive review for the investment environment in China (particularly corporate governance and tax regulations) will be carried out before developing the research questionnaire. I believe that quantitative method using a questionnaire is the most appropriate approach for this research for two main reasons. Comparing with qualitative research methods, quantitative approach may allow for more generalizability than qualitative approach. The second reason is to provide a new insight into investors' preferences for dividends. This will be done by collecting data directly from investors rather than depending on formal public data as the case in most of the previous research.
4b: Subjects, respondents, key informants
200 retail investors will be chosen using random sampling method after obtaining list of retail investors details from China's Financial Markets. The selected sample will be contacted and questionnaire forms will be distributed directly or through e-mail based on the location of the investor.
4c: Instruments, resources and research tools
This research will be based on primary data will be collected through a questionnaire targeting 200 retail investors directly.
Additionally, a comprehensive review for the current will be carried out. This will include both academic empirical research in this field. Moreover, there will be an extensive review for the investment environment in China (particularly corporate governance and tax regulations)
4d: Research procedure
After obtaining the School of Management approval on the proposal, the next step will be carrying out a comprehensive review for the previous research on dividend policy with more attention will be given to research carried out in China. This will be followed with a comprehensive review to the investment environment in China with more emphasis on corporate governance and tax regulations.
During the process of literature review, I will be working on developing the research questionnaire. Sample will be selected and respondents will be contacted to fill-in the questionnaires.
Writing up the dissertation will be a continuous process during the research period. Accordingly, a draft for each chapter will be written up with the completion of the stage related to that chapter. Supervisor's feedback may be obtained on each chapter if this was agreed by him/her.
4e: Ethical implications
The main ethical issue in this research is related to the list of investors' details. Using these data for the purpose of this research and maintaining the confidentiality of investors information is expected to be a vital concern for the authorities. Consequently, there will be an undertaken to the authorities and investors to maintain the confidentiality of the information gathered from the lists and from investors responses to the questionnaires.
4f: Analysis
The collected data will be compiled in form of tables and graphic charts. Frequency, mean, standard deviation, and significance test will be applied to conclude the findings. In order to test the research's hypotheses, t-test will be applied so as to find the relationship between variables, investor's category (short-term/long-term) and his concern (agency cost/tax) and investor's concern and his preference (cash dividends/stock dividends).
4g: What are the key readings for your research design?
Bryman, A., Bell, E., 2007. Business Research Methods. Secnd Edition. Oxford University Press. Neo York.
Collis, J. and Hussey, R., 2003. Business research: a practical guide for undergraduate and postgraduate students. Second Edition. Palgrave Macmillan.
Part 5: Time management and location
5a: Location
The research will be conducted in China. This will require me to travel to China, at least during the process of selecting the sample, distributing and collecting the questionnaires.
5b: Schedule and time planning
Task Date
Proposal Submission 26/02/2010
Literature Review From 15/05/2010 to 15/06/2010
Writing-up Literature Review Chapter By 15/06/2010
Developing The Research Questionnaire By 15/06/2010
Distributing The Questionnaire From 25/06/2010 to 30/06/2010
Collecting Questionnaires From 25/06/2010 to 5/07/2010
Writing-up Methodology First Draft From 25/06/2010 to 5/07/2010
代写英国金融硕士论文Analysing The Collected Data From 5/07/2010 to 30/07/2010
Writing-up Findings and Data Analysis Chapters From 15/07/2010 to 5/08/2010
Finalising The First Dissertation Full Draft By 10/08/2010
Modifying The Dissertation Draft According to Supervisor's Feedback By 20/08/2010
Submitting The Final Dissertation By 25/08/2010