CSRC Flags Greater Regulation of Dividend Issuance

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The head of China’s security regulator has mooted greater regulation of dividend distribution and bonus issues by listed companies.

Liu Shiyu, the secretary of the party committee of the China Securities Regulatory Commission (CSRC), was scathingly critical of those corporations that refuse to issue dividends or use bonus issues to engage in stock price speculation during a speech delivered at a meeting of the China Listed Companies Association.

Data indicates that returns provided by listed companies to investors have leapt by as much as 10 fold over the past decade. In 2016 approximately 70% of listed companies issued cash dividends to shareholders worth more than 830 billion yuan.

Liu said that while the dividend distribution practices of most listed companies were deserving of praise, many others were “iron roosters” that “couldn’t be plucked.”

According to Liu CSRC plans to take firm action against the problem of listed companies who refrain from dividend distribution when business is going well, and instead choose to recklessly invest cash in projects that can cause damage to shareholder interests should they capsize.

Viewing lack of dividend distribution without sound reason as a potential sign of problems within a company, Liu recommended that exchanges, accounting firms or even regulators conduct onsite investigations to perform much-needed “medical diagnosis” of such issues.

Members of academic have endorsed further regulatory measures by CSRC. Liu Junhai, the head of the Commercial Law Research Faculty of People’s University, said that regulation should place greater emphasis upon dividend distribution and called for the establishment of firm dividend policies.

Liu Shiyu also flagged further crackdown upon the abuse of bonus issues by the senior management of listed concern, with analysts pointing for the need to ensure that bonus issues better correspond to company performance and business growth.

 

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