The Dividend Initiation Decisions Of Newly Listed ...

The Dividend Initiation Decisions

Of Newly Listed Companies in Hong Kong:

Does Dividend Initiation Signal Firm Prosperity?

BY

CAI BIJIA

10050191

Major in Applied Economics

An Honours Degree Project Submitted to the School of Business

In Partial Fulfillment of the Graduation Requirement for the

Degree of Bachelor of Business Administration (Honours)

Hong Kong Baptist University

April 2013

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Table of Contents

I. ABSTRACT.................................................................................................................................................. 3

II. INTRODUCTION ........................................................................................................................................ 3

III. LITERATURE REVIEW ............................................................................................................................. 4

A. Signaling Theory ........................................................................................................................................ 4

B. Dividend Initiation...................................................................................................................................... 5

IV. DATA, SAMPLE SELECTION AND PARAMETER DEFINITION......................................................... 6

A. Data Sources ............................................................................................................................................... 6

B. Sample Selection......................................................................................................................................... 7

C. Parameter Definitions ................................................................................................................................. 7

Profitability - ROA ...................................................................................................................................... 7

Risk – Debt/Equity ratio .............................................................................................................................. 8

Current Assets ............................................................................................................................................. 8

D. Hypothesis and Contribution ...................................................................................................................... 8

V. FINDINGS AND ANALYSIS...................................................................................................................... 9

Dividend Initiation and Firm Performance...................................................................................................... 9

Changes in Return on Assets (ROA)............................................................................................................ 9

Changes in Debt/Equity Ratio ................................................................................................................... 10

Changes in Current Assets ........................................................................................................................ 10

Policy Implications........................................................................................................................................ 11

VI. LIMITATION OF THE RESEARCH ........................................................................................................11

Short Research Period ...................................................................................................................................11

Simplified Methodology................................................................................................................................11

VII. REFERENCE LIST ...................................................................................................................................12

VIII. RELEVANT DATA SOURCES ..............................................................................................................14

IX. APPENDIX.................................................................................................................................................15

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I. ABSTRACT

The paper intends to answer how dividend initiations (DI) affect profitability and risk of

newly listed companies in the context of Hong Kong. The methodology adopted here is to

evaluate a firm’s performance after DI using the changes in ROA, debt/equity ratio and

current assets. Listing data and the above mentioned parameters of 153 dividend-initiating

newly listed firms were obtained from various stock websites. Contrary to the traditional

dividend signaling theory implications, the hypothesis established in this paper is that we will

be able to observe the following three phenomena: 1) a drop in profitability, 2) a rise in risk,

and 3) a decrease in cash level. As expected, I do observe profitability decline and risk

increment. However, cash level does not go down in general in the context of Hong Kong,

which is different from empirical results from other countries. The reasons of these

phenomena are carefully studied by theories and intuition. The drop in profitability is due to

the loss of profitable investment opportunities while the risk increase is due to managers’

wish to boost earnings through debt borrowing. Cash level rise in the empirical results

implies that companies are eager to expand in development stage.

II. INTRODUCTION

In the world of corporate finance, dividend can be regarded as one of the most troublesome

topics. The literature on dividend policy is massive and covers extensive aspects. Many

economists commented that DI is a milestone in a firm’s life cycle. The Nobel Prize laureate

Michael Spence argues that managers have some nonpublic information about company’s

investment opportunities and use dividends as a signaling tool to convey this message. However,

empirical studies tend not to support the same conclusion. Rather, Sharma(2001) brought

forward a hypothesis that manager’s decision to initiate dividends does not depend on confidence

in future earnings but due to past performance. In other words, companies’ decision to initiate

dividends does not signal future earnings or a drop in risk. In order to test this hypothesis, I do

the similar study in Hong Kong.

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I track the dividend initiation (DI) decisions from a sample of 263 firms that went public in

Hong Kong Stock Exchange (HKSE) during the period 2010-2012 and find that 153 of them

initiated dividends. The sample is hence the 153 firms that have initiated dividends. The main

purpose of this paper is to analyze how DI decisions affect firm performance in terms of

profitability and risk in Hong Kong. Among the variables suggested by Sharma (2001), I

carefully select several parameters that can demonstrate profitability and risk. The return on

assets (ROA) percentage shows how profitable a company's assets are in generating revenue

(Needles, B. E. (1999)) thus is a good proxy for profitability. Debt/equity ratio measures

financial risk. Lastly, current assets are examined to show how the source of dividend payout is

affected.

III. LITERATURE REVIEW

Paper of Brav, Graham, Harvey and Michaely (2005) revealed that dividends are less

preferred compared to share repurchases due to the inflexibility of dividend policy. It is not

surprising to imply that the decision to initiate dividends must have gone through deliberation.

A. Signaling Theory

Talking about signaling theory, one cannot fail to mention Miller and Modigliani (1961) who

suggested that dividends or any kind of financing have no effect on the value of the firm

provided that there is no taxes, agency costs, asymmetric information, etc. As Miller and Scholes

(1978) subsequently demonstrate, under U.S tax code, this result may survive even if there is

differential taxation of dividends and capital gains. Lintner (1956) also addresses that managers

take future earnings into consideration when establishing dividend policies. In this reasoning,

whenever dividends as in indicator of future earnings change, investors should believe that

dividends carry some insider information.

Ever since Miller and Modigliani put forward the construct, signaling model was

established and perfected by some other theories. Bhattacharya (1979), John and Williams (1985)

and Miller and Rock (1985) are three important contributors in this model development. John

and Williams (JW) (1985) identified a signaling equilibrium with taxable dividends. In

equilibrium, insiders in firms with truly more valuable future cash inflows distribute larger

dividends and receive higher prices for their stock whenever the demand for cash by both their

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firm and its current stockholders (I+L) exceeds its internal supply of cash (C). In other words,

whenever C<I+L, a firm pays dividends. We can predict that a cash-rich firm may not initiate

dividends (C>I+L) while a cash-poor firm will opt for dividends (C<I+L). Under the

assumption of asymmetric information, Miller and Rock (1985) find that a consistent signaling

equilibrium can retain the time consistency of investment policy, but leads to lower levels of

investment than the optimal level under full information.

The model implies that dividend policy signify future prospects and therefore will

enhance firm performance, including profitability, revenue and growth rate. Hence, there should

be a positive relationship between dividends and profitability, dividends and stock price reaction.

Nevertheless, empirical evidence of signaling theory has not been convincing. Research of

watts (1973) and Gonedes (1978) show a weak relation between earnings and dividend decreases.

Penman (1983) concludes that “not all information in earnings forecasts is available in dividend

announcements” and “many firms do not adjust their dividends to the level of earnings implied

by the earnings forecast and so, for these firms with a relatively low adjustment of dividends, the

dividend announcement does not predict firms' values as well as the earnings forecast.”

B. Dividend Initiation

Research of Asquith and Mullins (1983) shows that: “For this sample of firms, initiating

dividends increases shareholders' wealth. The same is true of subsequent dividend increases.

Incorporating the effects of the magnitude of dividends and investors' anticipation of subsequent

increases, the wealth effect of subsequent dividend increases appears to be as large if not larger

than the effect of initiation.”

Healy and Palepu (1988) discovered that firms initiating dividend payments experienced

rapidly increasing earnings both prior to the first dividend and for two years afterwards. They

also found some evidence consistent with the dividend signaling hypothesis in that firms

initiating dividends experienced significant earnings growth in the two years following the

initiation. Interestingly, for firms omitting dividends, earnings also increase in the years after

omission.

Moreover, Lipson, Maquieira and Megginson(1998) find clear evidence that earnings

surprise are more likely to occur in initiators rather than non-initiators in the six years

surrounding initiation. John and Lang (1991) study insider trading around initiations and show

that the announcement effect is more prominent when insider trading occurred prior to the DI.

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Michaely, Thaler, and Womack (1995) find evidence of a long-term drift in stock prices

following initiations and omissions which is not explained by changes in yield or clienteles for

these stocks. Deshmukh (2003) studies a sample of firms that went public between 1990 and

1997 and finds that initiators are larger firms, with fewer growth opportunities and higher cash

flows than non-initiators. Grullon, G., R. Michaely and B. Swaminathan(2002) propose the

maturity hypothesis: it predicts that firms will pay dividends after they have reached the mature

stage of their life cycle, when they are encountered with higher cash flows, lower investment

opportunities and decreased risk. However, GMS intentionally exclude dividend initiations and

omissions from their empirical study, instead focusing on dividend changes; therefore they do

not test this prediction directly. Baker and Wurgler's(2004)(BW)"catering theory" states that

dividend-paying firms alter dividend policy in consideration of investor sentiment. BW measures

the dividend premium, i.e., the premium that investors are willing to pay for dividend paying

stocks, in different ways. They show that the premium is positively related to the aggregate

annual rate of initiation, continuation and payment of dividends by newly listed firms. Lie and Li

(2006) find support for the catering theory from a sample of firms that increased or decreased

dividends in the period of 1963 - 2000. They find that the dividend premium is positively related

to both the sign and the magnitude of changes in dividends, and that this relationship also is

manifested in the stock market reaction to the dividend changes. Kale, Kini and Payne (2012)

investigated the predictions of both JW (1985)-genre model and the ABW (2000) model.

The paper is organized as follows. I will elaborate data source, sample selection along

with parameters in the following section. Then, findings and analysis will be given based on the

empirical results. Lastly, limitations will be explained.

IV. DATA, SAMPLE SELECTION

AND PARAMETER DEFINITION

A. Data Sources

This paper analyzes the how DI decisions affect firm’s performance in terms of

profitability and risk. My sample targets at firms that were listed during 2010-2012 in Hong

Kong. I obtained the initial sample of 263 newly listed firms from Yahoo Finance, AAStocks

and TodayIR, of which 153 initiated dividends before the time being. The sample covers

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basically every industry: entertainment, restaurant, telecommunication, etc. I obtain the

following data from the above-mentioned websites:

listing date and DI date;

return on assets one year before and after the DI;

debt/equity ratio one year before and after the DI;

current assets one year before and after the DI

B. Sample Selection

Table 1 summarizes the firms that went public during 2010-2012 and those that initiated

dividends and the distribution.

Table 1

The Timing of the DI Decision by Firms Conducting IPOs(20102012)

Number of Dividend‐Initiating Firms in Each Year after the IPO Year

Year No. of IPO Total DI 0 1 2 3

2‐Jul‐05 101 73 10 51 11 1

3‐Jul‐05 100 65 17 48 N/A N/A

4‐Jul‐05 64 15 15 N/A N/A N/A

Totals 265 153 42 99 11 1

% DI 27% 65% 7% 1%

Column 4-7 of the table provide the breakdown of the DI decision, which is given

relative to the IPO year. 0 means that the firm initiates dividends in the same year in which it

goes public, 1 means that the firm initiates dividend in the next calendar year (for example, a

firm goes public in 2010 but pays out dividends in 2011), and so on. Table 1 suggests that firms

are most likely to initiate dividends in the next calendar year after going public (year 1, 65%).Of

the 265 newly listed firms, 42(27%) initiated dividends in the next calendar year while 99(65%)

firms initiated in the third calendar year.

C. Parameter Definitions

Since the focus is to evaluate the effect of DI on firm’s performance in terms of

profitability and risk, I use three parameters, namely ROA, debt/equity ratio and current assets.

Profitability ROA

Profitability is usually measured with Return on assets (ROA), which is:

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,

following methodology suggested by Barber and Lyons (1996). Since the focus is on how DI

affects ROA, the data of prior and after DI are obtained. After that, the change of ROA is

calculated to show the percentage change.

Risk – Debt/Equity ratio

Debt/equity ratio is a financial ratio indicating the relative proportion of shareholders'

equity and debt used to finance a company's assets, also known as leverage or risk (Peterson, P.

P., & Fabozzi, F. J. (1999)).

Current Assets

The formula of current assets is (Downes, J., & Goodman, J. E. (1998)):

Current assets have significant meaning in a firm. It provides funds that are ready to be

converted to cash in near term. But it is also easily exploited by managers and engender agency

costs.

D. Hypothesis and Contribution

The primary hypothesis in this paper is dividend initiation does not signal future earnings

of a firm. The motive of dividend initiation is the past performance of a firm, rather than the

manager’s expectation of future earnings. In essence, the research contradicts the implications of

signaling theory convey positive information about future firm performance.

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A model in signaling theory developed by Miller and Rock (1985) suggests that dividend

announcement convey information to the investors regarding future earnings prospects. Grullon

(2002) subsequently alleged that dividend increase signals a decrease in systematic risk.

In this study, however, I want to prove whether empirical studies run contrary to this

signaling theory in Hong Kong particularly.

The reasoning works as follows:

If dividend initiation does not signify future prosperity, we should be able to observe a

drop in profitability. Also, we might witness a rise in risk due to a rise in borrowings. Last but

not least, current assets should decrease after DI since the firms support their dividends with

excess cash and they aim to achieve a balance sheet with thinner current assets.

This study makes several contributions to the body of empirical literature: 1) I include all

firms going public in 2010-2012, which is representative and creates no bias to any industry; 2)

The research gap in DI in Hong Kong is partially filled by this study; 3) Short-term impact of DI

is focused on rather than long-term impact.

V. FINDINGS AND ANALYSIS

Dividend Initiation and Firm Performance

The empirical results suggest that subsequent to dividend initiation, firm profitability

trends down and financial risk ascends. In other words, firm’s performance has deteriorated

since the dividends are initiated. I will elaborate from the three ratios:

Changes in Return on Assets (ROA)

If the hypothesis that dividend initiation does not predict future earnings is correct, then

ROA is supposed to decrease after DI. Appendix 1 summarizes the ROA one year before and

after the DI decisions of 153 DI firms. While the absolute value carries barely any meaning,

change in percentage and the average change is calculated. It shows that ROA decreases from

14.711 to 10.235, rising a percentage of 25.51% in average. The median firm also demonstrates

similar pattern: its ROA declines from 11.68 to 8.54. It implies that for every dollar of asset, the

firm is earning $3 less after DI. Some research results support this finding. Farsio, F., Geary, A.,

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& Moser, J (2004) attributed the reason of decline to firms’ failure to catch some investment

opportunities due to dividend payout and thus suffer from earnings decline.

Changes in Debt/Equity Ratio

Changes in financial leverage reflect managers’ prospect toward company’s risk.

Managers may also opt to increase financial leverage due to low profitability. They may borrow

more debts and use excess funds in high-risk investments to maximize return. Leverage is

beneficial to company in that it avoids stock dilution and enjoys tax advantage. And actually, as

Bodie, Z., Kane, A., & Marcus, A. J. (2005) said, utilities industry with lots of debt are less risky

than unlevered firms such as technology companies. However, it is predictable that high level of

debt may drag a firm to default and bankruptcy in recession periods.

The hypothesis implies that DI will lead to an increase in financial leverage, making a

larger debt-equity ratio. Appendix 2 summarizes the debt-equity ratio one year before and after

DI. Again, percentage change and the average percentage change are calculated. It shows a rise

in financial leverage, from 37.49 to 44.57, which is consistent to the hypothesis. Also, the

median firm demonstrates an increase in debt-equity ratio, from 19.44 to 28.5.

Changes in Current Assets

Appendix 2 shows that current asset volume increases from 671,189,000 to 1,019,689

HKD, at a rate of 51.55%. This finding contradicts Sharma’s hypothesis. The existing empirical

research demonstrates that dividend payout is associated with lower cash levels. Grullon, G.,

Michaely, R., & Swaminathan, B. (2002) suggest that their results are consistent with the

exposition that dividend initiating firms generally have more idle funds and thus pay out

dividends to defray excess cash. It helps to alleviate agency problem and avoid over-investments.

Jensen (1986) states that agency costs arise from under- monitoring of managers and misuse of

cash. Firms that have large amount of cash are more likely to suffer from conflict of interests

between managers and shareholders. Thus, firms may choose to pay out dividends to reduce

excess cash and meanwhile prevent managers from misusing cash. In my research results, the

rise in current assets may result from the fact that the firms purchase more assets to support their

development in the early stages. Otherwise, the firms may not have distributed enough dividends

back to their shareholders.

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Policy Implications

As dividend initiation is announced, investors read it as a positive signal, most likely a

combination of expectation of continued high profitability and reduction in agency costs. As the

euphoria of the period around dividend initiation subsides, investors realize that the firms’

investment opportunities are shrinking and lower their expectations for earnings growth.

The results suggest that managers who intend to take advantage of DI to signal investors

to have faith in their companies may fail the goal. Due to the free flow of information, the drop

in profitability and rise in risk will eventually tell investors the real situation of the companies.

VI. LIMITATION OF THE RESEARCH

Short Research Period

Since the listing information in Hong Kong is extremely limited, especially those listed long

ago. Hence, I use the firms listed in the year 2010-2012 as sample, which is a small sample

derived from a short period. Although I mentioned that the focus is on short-term impact of

DI, but long-term impact is also worth studying. It can take stock fluctuation as an important

research parameters and study the trend of stock.

Simplified Methodology

Three variables are used in the research, namely ROA, debt/equity ratio and current assets.

Actually, there are more variables that can be included, for example, capital expenditures,

free cash flow, market abnormal returns and so on. The inclusion of these variables can

further consolidate the hypothesis. Furthermore, a more sophisticated model involving

regression and software mastery can be developed in further studies. It can reveal much more

information than ratio comparison used in this study.

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VII. REFERENCE LIST

Asquith, P., & Mullins, D. W. (1983). The Impact of Initiating Dividend Payments on

Shareholders' Wealth. The Journal of Business, 56(1), 77-96. Retrieved April 16, 2013, from

http://0-www.jstor.org.hkbulib.hkbu.edu.hk/stable/2352747

Baker, M., & Wurgler, J. (2004). A Catering Theory of Dividends. The Journal of Finance, 59(3),

1125-1165. Retrieved April 24, 2013, from the Wiley Online Library database.

Baker, M., & Wurgler, J. (2004). Appearing and disappearing dividends: The link to catering

incentives. Journal of Financial , 73(2), 271-288. Retrieved April 24, 2013, from the

ScienceDirect database.

Bhattacharya, S. (1979). Imperfect Information, Dividend Policy, and "The Bird in the Hand"

Fallacy. The Bell Journal of Economics, 10(1), 259-270. Retrieved April 15, 2013, from the

EconLit database.

Bodie, Z., Kane, A., & Marcus, A. J. (2005). Investments (6th ed.). Boston, Mass.: McGraw-Hill

Irwin.

Chew, L. (1996). Managing derivative risks: the use and abuse of leverage. Chichester: Wiley.

Downes, J., & Goodman, J. E. (1998). Dictionary of finance and investment terms (5th ed.).

Hauppauge, N.Y.: Barron's Educational Series.

Farsio, F., Geary, A., & Moser, J. (2004). THE RELATIONSHIP BETWEEN DIVIDENDS

AND EARNINGS. Journal for Economic Educators, 4(4). Retrieved April 16, 2013, from

http://capone.mtsu.edu/jee/pdf/farsio.pdf

Financial Leverage. (n.d.). Financial Analysis Software | Financial Analysis | Financial

Statements | Current Ratio | Financial Ratio | ReadyRatios.com. Retrieved April 15, 2013, from

http://www.readyratios.com/reference/debt/financial_leverage.html

Gonedes, Nicholas J.. "Corporate Signaling, External Accounting, and Capital Market

Equilibrium: Evidence on Dividends, Income, and Extraordinary Items." Journal of Accounting

Research 16.1 (1978): 26-79. JSTOR. Web. 16 Apr. 2013.

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Grullon, G., Michaely, R., & Swaminathan, B. (2002). Are Dividend Changes a Sign of Firm

Maturity?. The Journal of Business, 75(3), 387-424.

Grullon, Gustavo, Roni Michaely, Shlomo Benartzi, and Richard H. Thaler. "Dividend Changes

Do Not Signal Changes in Future Profitability." The Journal of Business 78.5 (2005): 1659-1682.

Chicago Journals. Web. 16 Apr. 2013.

Gwilym, O. a., Seaton, J., & Thomas, S. (2004). Dividend Cuts, Firm Profitability & Financial

Characteristics. n/a, N/A. Retrieved April 16, 2013, from

http://eprints.soton.ac.uk/35978/1/AF04-18.pdf

Healy, P. M., & Palepu, K. G. (1988). Earnings information conveyed by dividend initiation and

omissions. Journal of Financial Economics, 21(2), 149-176. Retrieved April 16, 2013, from

http://dspace.mit.edu/bitstream/handle/1721.1/47298/earningsinformat00heal.pdf?sequence=1

Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The

American Economic Review, 76(2), 323-329. Retrieved April 16, 2013, from http://0-

www.jstor.org.hkbulib.hkbu.edu.hk/stable/1818789

John, K., & Williams, J. (1985). Dividends, Dilution, and Taxes: A Signalling Equilibrium. The

Journal of Finance, 40(4), 1053-1070. Retrieved April 15, 2013, from http://0-

www.jstor.org.hkbulib.hkbu.edu.hk/stable/2328394

Kale, Jayant R, Omesh Kini, and Janet D. Payne. "The Dividend Initiation Decision of Newly

Public Firms: Some Evidence on Signaling with Dividends." journal of financial and quantitative

analysis 47.2 (2012): 1-68. Cambridge Journal. Web. 15 Apr. 2013.

Li, W., & Lie, E. (2006). Dividend changes and catering incentives. Journal of Financial

Economics, 80(2), 293-308. Retrieved April 24, 2013, from the Sciverse database.

Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings,

and taxes. The American Economic Review, 46(2), 97-113. Retrieved April 16, 2013, from


Lipson, M. L., Maquieira, C. P., & Megginson, W. (1998). Dividend Initiations and Earnings

Surprises. Financial Management, 27(3), 36-45. Retrieved April 24, 2013, from the JSTOR

database.

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Miller, M. H., & Modigliani, F. (1961). Dividend Policy, Growth, and the Valuation of Shares.

Journal of Business, 34(4), 411-433. Retrieved April 15, 2013, from the University of Chicago

database.

Miller, M. H., & Rock, K. (1985). Dividend Policy under Asymmetric Information. The Journal

of Finance, 40(4), 1031-1051. Retrieved April 15, 2013, from the EconLit database.

Needles, B. E. (1999). Principles of accounting (7th ed., instructor's annotated ed.). Boston:

Houghton Mifflin Co..

Penman, Stephen H.. "The Predictive Content of Earnings Forecasts and Dividends." The

Accounting Review 38.4 (1996): 1181-1199. JSTOR. Web. 15 Apr. 2013.

Peterson, P. P., & Fabozzi, F. J. (1999). Analysis of financial statements. New Hope, Pa.: Frank J.

Fabozzi Associates.

Sharma, S. (2001). Do Dividend Initiations Signal Firm Prosperity?. n/a, N/A, 1-36. Retrieved

April 21, 2013, from the MIT.edu database

Watts, R. (1973). Journal of Business. The Information Content of Dividends, 46(2), 191-211.

Retrieved April 16, 2013, from http://0-www.jstor.org.hkbulib.hkbu.edu.hk/stable/2351363

Weston, J. F., & Brigham, E. F. (1969). Managerial finance (3d ed.). New York: Holt, Rinehart

and Winston.

VIII. RELEVANT DATA SOURCES

Name URL AAstock 阿斯達克財經網 www.aastocks.com

Yahoo! Finance http://hk.finance.yahoo.com/

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IX. APPENDIX

Appendix 1 Influence of DI on the change in ROA

Code Name ROA2 ROA1 Change in ROA

6889 DYNAM JAPAN 10.16 9.7 0.0474

3666 XIAO NAN GUO 8.99 9.94 ‐0.0956

8240 C CITYRAILTEC 17.37 46.99 ‐0.630346882

1366 JIANGNAN GP 7.11 7.58 ‐0.0620

1613 SYNERTONE 24.03 28.07 ‐0.1439

1300 TRIGIANT 10.87 9.4 0.1564

1266 XIWANG STEEL 4.57 15.86 ‐0.7119

1210 CHRISTINE 0.98 5.46 ‐0.820512821

1830 PERFECT SHAPE 17.9 19.42 ‐0.078269825

1972 SWIREPROPERTIES 7.91 11.51 ‐0.3128

1315 VISION FAME 8.46 13.87 ‐0.3901

1803 ASR HOLDINGS 26.09 45.34 ‐0.4246

6830 HUAZHONG HLDG 0.11 7.33 ‐0.9850

1263 PC PARTNER 2.3 2.76 ‐0.1667

8031 ETS GROUP 13.59 27.81 ‐0.5113

1251 SPT ENERGY 9.93 12.38 ‐0.1979

3778 CHINA WEAVING 0.15 8.33 ‐0.9820

579 JNCEC 2.93 3.01 ‐0.0266

1298 TECHCOMP 2.25 6.57 ‐0.6575

2200 HOSA INT'L 26.11 26.22 ‐0.004195271

1929 CHOW TAI FOOK 13.37 12.18 0.0977

1336 NCI 0.59 0.72 ‐0.1806

6880 OTO HOLDINGS 5 21.61 ‐0.7686

2121 FIRST CHEM 10.2 11.87 ‐0.1407

1262 LABIXIAOXIN 13.65 11.76 0.1607

1023 SITOY GROUP 19.87 30.54 ‐0.3494

6388 COACH‐DRS‐RS 33.43 29.79 0.1222

6823 HKT‐SS 2.43 1.88 0.2926

1239 JIN BAO BAO H 7.4 11.7 ‐0.3675

6813 CAPMALLSASIA‐S 5.5 5.65 ‐0.0265

6030 CITIC SEC 2.51 8.48 ‐0.7040

1235 TRAVEL EXPERT 12.01 20.78 ‐0.422040423

1096 ACTIVE GROUP 6.3 13.35 ‐0.5281

6868 TENFU 13.8 11.84 0.1655

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1028 C.BANNER 13.87 16.76 ‐0.172434368

1236 QIANLONG TECH 2.06 8.81 ‐0.766174801

6808 SUNART RETAIL 5.4 3.87 0.3953

1127 1010 PRINTING 7.94 9.72 ‐0.1831

1663 S HARBOUR PPT 5.65 7.83 ‐0.2784

6838 WINOX 15.47 18.19 ‐0.1495

1259 PRINCE FROG 19.07 16.87 0.1304

2098 ZALL DEV 9.08 13.15 ‐0.3095

1151 ELEC & ELTEK 5.69 7.71 ‐0.2620

1082 MODERN EDU 16.6 20.86 ‐0.2042

1241 SHUANGHUA H 3.17 7.42 ‐0.5728

1115 TIBET 5100 15.54 18.32 ‐0.151746725

1025 WUMART 5.98 6.94 ‐0.1383

847 KAZAKHMYS‐S 7.93 13.19 ‐0.3988

1488 L&M HANDBAGS 26.51 22.96 0.1546

1913 PRADA 18.48 14.67 0.2597

1061 ESSEX BIO‐TECH 11.75 15.24 ‐0.229002625

871 XIANGYU DREDG 7.68 19.37 ‐0.6035

831 CR ASIA 10.39 8.94 0.162192394

1910 SAMSONITE 8.19 5.62 0.4573

935 DRAGON CROWN 9.51 8.24 0.1541

3363 ZHENGYE INT'L 2.85 3.2 ‐0.1094

8193 GC PRO SER 9.41 48.07 ‐0.804243811

2083 CHINAFLOORING 3.98 9.86 ‐0.5963

805 GLENCORE‐S 0.95 4.7 ‐0.7979

1150 MILAN STATION 11.99 32.74 ‐0.6338

2607 SH PHARMA 4.02 4.28 ‐0.0607

2299 BILLION IND 9.58 12.46 ‐0.2311

2789 YUANDA CHINA 3.59 8.44 ‐0.5746

87001 HUI XIAN REIT 7.36 2.41 2.0539

1623 HILONG 8.54 8.44 0.0118

1181 TANG PALACE 10.96 11.14 ‐0.016157989

6488 SBI HLDGS‐DRS 0.19 0.35 ‐0.4571

3360 FE HORIZON 2.5 2.29 0.0917

1378 CHINA HONGQIAO 12.29 19.8 ‐0.3793

3688 TOP SPRING 4.81 5.01 ‐0.0399

1057 ZHEJIANG SHIBAO 6.1 10.74 ‐0.4320

8098 CL GROUP 11.02 13.38 ‐0.176382661

1121 BAOFENGMODERN 10.78 11.35 ‐0.0502

1143 TELEFIELD 2.71 7.39 ‐0.6333

8265 POWERWELL PAC 1.98 8.95 ‐0.7788

1075 CAPINFO 7.67 7.95 ‐0.0352

1323 NEWTREE GROUP 11.81 20.63 ‐0.427532719

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2011 KEE 0.3 6.21 ‐0.951690821

1089 SUMPO FOOD 0.01 6.92 ‐0.9986

935 Dragon Crown Group Holdings Limited

9.51 8.24 0.1541

1157 Changsha Zoomlion Heavy Industry Science and Technology Deve

8.24 11.27 ‐0.2689

1112 Biostime International Holdings Limited

21.03 21.63 ‐0.027739251

1798 China Datang Corporation Renewable Power Co. Limited ‐ H Share

0.2 1.34 ‐0.8507

3618 Chongqing Rural Commercial Bank Co., Ltd.

67.89 71.38 ‐0.0489

1282 World Wide Touch Technology (Holdings) Limited

4.38 12.99 ‐0.6628

468 Greatview Aseptic Packaging Company Limited

13.09 12.69 0.0315

1768 Sateri Holdings Limited 2.32 6.13 ‐0.6215

1090 Da Ming International Holdings Limited

0.73 2.33 ‐0.6867

1708 Nanjing Sample Technology Co. Ltd. ‐ H Shares

10.45 10.08 0.0367

1110 Kingworld Medicines Group Limited

7.38 8.22 ‐0.1022

1086 Goodbaby International Holdings Limited

5.68 5.58 0.0179

1101 China Rongsheng Heavy Industries Group Holdings Limited

3.36 4.19 ‐0.1981

8207 Credit China Holdings Limited 11.32 13.94 ‐0.1879

1091 CITIC Dameng Holdings Limited

4.59 3.35 0.3701

312 Shirble Department Store Holdings (China) Limited

2.44 8.14 ‐0.7002457

842 Leoch International Technology Limited

1.41 6.67 ‐0.7886

1230 Yashili International Holdings Limited

6.6 11.21 ‐0.4112

1299 AIA Group Limited 1.4 2.5 ‐0.4400

460 Sihuan Pharmaceutical Holdings Limited

9.31 7.56 0.231481481

1700 Springland International Holdings Limited

6.27 6.63 ‐0.0543

1685 Boer Power Holdings Limited 12.29 12.4 ‐0.008870968

8269 Wealth Glory Holdings Limited 34.42 49.72 ‐0.30772325

956 China Suntien Green Energy Corporation Limited

3.19 2.39 0.3347

2266 Kosmopolito Hotels International Limited

3.02 0.72 3.1944

1733 Winsway Coking Coal Holding Limited

6.41 10.18 ‐0.3703

2208 Xinjiang Goldwind Science & Technology Co Ltd

1.87 8.06 ‐0.7680

2468 Trony Solar Holdings Company Limited

15.85 28.05 ‐0.4349

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1021 Midas Holdings Limited 0.55 4.36 ‐0.8739

1308 SITC International Holdings Company Limited

10.98 14.22 ‐0.2278

1682 Ford Glory Group Holdings Limited

3.09 7.02 ‐0.5598

926 Besunyen Holdings Company Limited

3.17 25.01 ‐0.8733

1698 Boshiwa International Holding Limited

7.87 15.21 ‐0.4826

867 China Medical System Holdings Limited

13.7 22.79 ‐0.3989

853 Micro Port Scientific Corp 11.05 26.18 ‐0.5779

2198 China Sanjiang Fine Chemicals Company Limited

10.49 14.79 ‐0.2907

2238 Guangzhou Automobile Group Co., Ltd. ‐ H Shares

9.58 11.15 ‐0.1408

1428 Bright Smart Securties & Commodities Group Limited

2.31 6.4 ‐0.6391

2233 West China Cement Limitd 7.86 16.68 ‐0.5288

640 Infinity Chemical Holdings Company Limited

6.87 17.19 ‐0.6003

1288 Agricultural Bank of China Limited

82.4 85.98 ‐0.0416

2118 Tian Shan Development (Holding) Limited

4.34 5.52 ‐0.2138

1019 Convoy Financial Services Holdings Limited

19.18 23.38 ‐0.179640719

976 Chiho‐Tiande Group Limited 9.85 22.66 ‐0.5653

1666 Tong Ren Tang Technologies Co. Ltd. ‐ H Shares

9.09 9.13 ‐0.0044

1788 Guotai Junan International Holdings Limited

2.51 3.83 ‐0.3446

951 Chaowei Power Holdings Limited

9.98 14.28 ‐0.3011

1020 Sinoref Holdings Limited 24.51 36.98 ‐0.3372

325 Trauson Holdings Company Limited

24.21 25.33 ‐0.0442

2128 China Liansu Group Holdings Limited

20.11 18.41 0.0923

2208 Xinjiang Goldwind Science & Technology Co Limited

8.06 11.73 ‐0.3129

1026 Universal Technologies Holdings Limited

6.16 7.26 ‐0.1515

1282 World Wide Touch Technology (Holdings) Limited

12.99 17.88 ‐0.2735

2228 COSTIN New Materials Group Limited

17.81 23.66 ‐0.2473

873 International Taifeng Holdings Limited

19.94 21.22 ‐0.0603

8337 Directel Holdings Limited 16.91 31.78 ‐0.467904342

2188 China Titans Energy Technology Group Co., Limited

9.51 17.64 ‐0.4609

2268 Youyuan International Holdings Limited

11.29 12.71 ‐0.1117

2222 NVC Lighting Holding Limited 11.86 11.38 0.0422

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950 Lee's Pharmaceutical Holdings Limited

18.62 22.23 ‐0.1624

503 Lansen Pharmaceutical Holdings Limited

9.07 11.68 ‐0.2235

973 L'OCCITANE International S.A. 12.66 18.7 ‐0.3230

1863 Sijia Group Company Limited 16.5 36.44 ‐0.5472

877 O‐Net Communications (Group) Limited

12.81 24.56 ‐0.478420195

1999 Man Wah Holdings Limited 17.65 36.3 ‐0.5138

830 Far East Global Group Limited 7.18 13.22 ‐0.45688351

1998 Flyke International Holdings Limited

19.86 28.75 ‐0.3092

881 Zhongsheng Group Holdings Limited

6.37 8.55 ‐0.2550

1280 Huiyin Household Appliances (Holdings) Company Limited

4.94 9.67 ‐0.4891

2010 Ruinian International Limited 13.12 17.09 ‐0.2323

1683 International Mining Machinery

9.28 10.37 ‐0.1051

1938 Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited

1.94 17.18 ‐0.8871

1966 China SCE Property Holdings Limited

4.68 8.94 ‐0.4765

953 Meike International Holdings Limited

9.17 16.65 ‐0.4492

Average ROA change 10.235 14.711 ‐0.255120091

Appendix 2 Influence of DI on the change in Debt/equity ratio and current assets

Code Name *D/E *CA

6889 DYNAM JAPAN ‐0.4246 0.0605

3666 XIAO NAN GUO ‐0.5955 0.2037

8240 C CITYRAILTEC #DIV/0! 4.998464

1366 JIANGNAN GP ‐0.1327 0.2527

1613 SYNERTONE ‐1.0000 0.0490

1300 TRIGIANT ‐0.4374 0.0639

1266 XIWANG STEEL ‐0.2526 0.2015

1210 CHRISTINE #DIV/0! 0.276316

1830 PERFECT SHAPE #DIV/0! 0.675456

1972 SWIREPROPERTIES ‐0.0238 0.1722

1315 VISION FAME ‐0.0516 0.0513

1803 ASR HOLDINGS ‐0.5000 0.6901

6830 HUAZHONG HLDG ‐0.1713 0.1864

1263 PC PARTNER 0.0355 (0.1097)

8031 ETS GROUP 0.3471 0.5593

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1251 SPT ENERGY ‐0.1928 0.7784

3778 CHINA WEAVING ‐0.0568 (0.3680)

579 JNCEC 0.5330 (0.0239)

1298 TECHCOMP 0.5422 0.1186

2200 HOSA INT'L #DIV/0! 0.233397

1929 CHOW TAI FOOK ‐0.1519 0.6456

1336 NCI 1.6187 0.1733

6880 OTO HOLDINGS ‐0.4848 0.8803

2121 FIRST CHEM 0.0322 (0.0738)

1262 LABIXIAOXIN ‐0.5863 (0.1278)

1023 SITOY GROUP ‐1.0000 1.3150

6388 COACH‐DRS‐RS ‐0.0909 0.1150

6823 HKT‐SS 0.0199 0.1685

1239 JIN BAO BAO H ‐0.4198 (0.0104)

6813 CAPMALLSASIA‐S 1.1175 0.0052

6030 CITIC SEC 0.5318 0.1296

1235 TRAVEL EXPERT #DIV/0! 0.474132

1096 ACTIVE GROUP 1.1553 0.2620

6868 TENFU ‐0.6682 (0.2938)

1028 C.BANNER #DIV/0! 0.31596

1236 QIANLONG TECH #DIV/0! ‐0.00625

6808 SUNART RETAIL 0.5372 (0.0044)

1127 1010 PRINTING 0.1125 0.4127

1663 S HARBOUR PPT 0.0082 0.1754

6838 WINOX 0.1227 0.0099

1259 PRINCE FROG ‐1.0000 0.0853

2098 ZALL DEV 0.6808 0.4589

1151 ELEC & ELTEK ‐0.3025 (0.1385)

1082 MODERN EDU ‐1.0000 1.0474

1241 SHUANGHUA H ‐0.8345 (0.2849)

1115 TIBET 5100 #DIV/0! ‐0.00407

1025 WUMART 0.8941 0.2043

847 KAZAKHMYS‐S 0.8382 (0.0243)

1488 L&M HANDBAGS ‐0.5791 (0.1387)

1913 PRADA ‐0.1746 0.2416

1061 ESSEX BIO‐TECH #DIV/0! 0.137751

871 XIANGYU DREDG 13.6798 0.3892

831 CR ASIA #DIV/0! 0.058366

1910 SAMSONITE 1.3984 0.1668

935 DRAGON CROWN 1.4582 (0.3030)

3363 ZHENGYE INT'L 0.3742 0.1755

8193 GC PRO SER #DIV/0! 0.621887

2083 CHINAFLOORING ‐0.3485 (0.1032)

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805 GLENCORE‐S 0.1080 0.1821

1150 MILAN STATION 147.7143 (0.1706)

2607 SH PHARMA ‐0.1918 0.0780

2299 BILLION IND 0.4925 (0.1983)

2789 YUANDA CHINA 0.2235 0.2278

87001 HUI XIAN REIT 8.0256 1.1523

1623 HILONG 0.0830 0.1150

1181 TANG PALACE #DIV/0! ‐0.04427

6488 SBI HLDGS‐DRS 0.0975 0.3534

3360 FE HORIZON ‐0.1027 0.2413

1378 CHINA HONGQIAO 0.8711 0.3677

3688 TOP SPRING ‐0.0826 0.2096

1057 ZHEJIANG SHIBAO 0.2581 0.2202

8098 CL GROUP #DIV/0! ‐0.24193

1121 BAOFENGMODERN 0.1608 (0.0085)

1143 TELEFIELD 0.5185 0.1341

8265 POWERWELL PAC ‐0.2772 0.0585

1075 CAPINFO ‐0.2267 0.0175

1323 NEWTREE GROUP #DIV/0! ‐0.1466

2011 KEE #DIV/0! 0.006046

1089 SUMPO FOOD 2.2216 0.0508

935 Dragon Crown Group Holdings Limited ‐0.9272

(0.3030)

1157 Changsha Zoomlion Heavy Industry Science and Technology Deve 0.3428

0.3219

1112 Biostime International Holdings Limited #DIV/0!

0.065396

1798 China Datang Corporation Renewable Power Co. Limited ‐ H Share 0.1183

(0.9992)

3618 Chongqing Rural Commercial Bank Co., Ltd. 0.0542

0.2646

1282 World Wide Touch Technology (Holdings)

Limited 0.2917

(0.1001)

468 Greatview Aseptic Packaging Company Limited ‐0.3547

0.0968

1768 Sateri Holdings Limited ‐0.1637 (0.2685)

1090 Da Ming International Holdings Limited ‐0.1819

(0.2012)

1708 Nanjing Sample Technology Co. Ltd. ‐ H Shares ‐0.3553

0.0363

1110 Kingworld Medicines Group Limited 0.2082

(0.0586)

1086 Goodbaby International Holdings Limited ‐0.3765

(0.0040)

1101 China Rongsheng Heavy Industries Group Holdings

Limited 0.0308

(0.1054)

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8207 Credit China Holdings Limited 0.7998 0.2983

1091 CITIC Dameng Holdings Limited 0.2810

(0.0017)

312 Shirble Department Store Holdings (China) Limited #DIV/0!

0.166952

842 Leoch International Technology Limited 0.2935

0.1986

1230 Yashili International Holdings Limited 8.8902

0.1101

1299 AIA Group Limited ‐0.1410 (0.1169)

460 Sihuan Pharmaceutical Holdings Limited #DIV/0!

‐0.17694

1700 Springland International Holdings Limited 0.4438

0.0076

1685 Boer Power Holdings Limited #DIV/0! 0.060827

8269 Wealth Glory Holdings Limited #DIV/0!

1.208514

956 China Suntien Green Energy Corporation Limited 0.2429

0.1370

2266 Kosmopolito Hotels International Limited ‐0.1373

0.6977

1733 Winsway Coking Coal Holding Limited 2.7738

0.6282

2208 Xinjiang Goldwind Science & Technology Co Ltd 1.7976

0.1108

2468 Trony Solar Holdings Company Limited 0.0423

0.9898

1021 Midas Holdings Limited 0.5484 3.9947

1308 SITC International Holdings Company Limited 2.3042

2.3215

1682 Ford Glory Group Holdings Limited 0.0682

0.1353

926 Besunyen Holdings Company Limited 2.0658

3.5246

1698 Boshiwa International Holding Limited 0.2229

0.8680

867 China Medical System Holdings Limited 3.8310

1.6530

853 Micro Port Scientific Corp 0.0045 2.8548

2198 China Sanjiang Fine Chemicals Company Limited 0.4769

1.0534

2238 Guangzhou Automobile Group Co., Ltd. ‐ H Shares 0.0319

0.1284

1428 Bright Smart Securties & Commodities Group Limited 19.7164

1.3931

2233 West China Cement Limitd 1.3788 0.3575

640 Infinity Chemical Holdings Company Limited 1.9269

0.2389

1288 Agricultural Bank of China Limited ‐0.0566

0.2488

2118 Tian Shan Development (Holding) Limited 0.0980

0.2936

1019 Convoy Financial Services Holdings Limited #DIV/0!

1.393101

976 Chiho‐Tiande Group Limited 0.3952 0.9886

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1666 Tong Ren Tang Technologies Co. Ltd. ‐ H Shares 6.5729

0.1607

1788 Guotai Junan International Holdings Limited ‐1.0000

0.2542

951 Chaowei Power Holdings Limited 0.0416

1.0960

1020 Sinoref Holdings Limited ‐1.0000 2.4339

325 Trauson Holdings Company Limited ‐1.0000

0.5786

2128 China Liansu Group Holdings Limited 0.7861

0.8482

2208 Xinjiang Goldwind Science & Technology Co Limited 1.7976

1.0234

1026 Universal Technologies Holdings Limited 2.3749

2.0400

1282 World Wide Touch Technology (Holdings)

Limited 0.5616

1.3464

2228 COSTIN New Materials Group Limited 1.1412

1.4582

873 International Taifeng Holdings Limited 0.9467

1.2989

8337 Directel Holdings Limited #DIV/0! 3.388522

2188 China Titans Energy Technology Group Co.,

Limited 1.6436

1.0206

2268 Youyuan International Holdings Limited ‐0.6074

1.4481

2222 NVC Lighting Holding Limited 1.4018 1.3486

950 Lee's Pharmaceutical Holdings Limited ‐0.3665

0.7335

503 Lansen Pharmaceutical Holdings Limited 1.4651

0.7149

973 L'OCCITANE International S.A. ‐0.3313

0.0817

1863 Sijia Group Company Limited ‐0.3177 0.8154

877 O‐Net Communications (Group) Limited #DIV/0!

4.164212

1999 Man Wah Holdings Limited ‐0.3160 0.4945

830 Far East Global Group Limited #DIV/0!

0.028202

1998 Flyke International Holdings Limited ‐0.3330

1.1014

881 Zhongsheng Group Holdings Limited 0.9190

1.8777

1280 Huiyin Household Appliances (Holdings) Company Limited 10.8901

1.1028

2010 Ruinian International Limited ‐0.1298 1.8470

1683 International Mining Machinery ‐0.4147

0.0348

1938 Chu Kong Petroleum and Natural Gas Steel Pipe

Holdings Limited 1.0303

0.6126

1966 China SCE Property Holdings Limited 0.5878

0.4526

953 Meike International Holdings 1.6667 1.7284

23 | P a g e

24 | P a g e

Limited

Average ROA change 0.1888 0.5155

(#DIV/0!: occurs when total debts or assets is 0 or N/A)

The Dividend Initiation Decisions Of Newly Listed ...

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