Dividend and Excess Return in China

Jiaqi Da and Annuar Md Nassir and Tek, Andrew Wei Saw and Hui Zhang and Wei, Theng Lau (2023) Dividend and Excess Return in China. Asian Academy of Management Journal of Accounting and Finance, 19 (2). pp. 105-126. ISSN 1823-4992

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Investors are always chasing excess returns. To examine the three driving factors affecting China A-share excess returns, namely systematic risk, idiosyncratic risk and market sentiment, this study divided A-shares into non-dividend and dividend-paying groups based on the Dividend Paid for Common Shares in the notes of the financial report. In addition, this study used the Capital Asset Pricing model, Single-Index model, Arbitrage Pricing theory and Fama-French three- and five-factor model to analyse the three main driving factors. The Gibbons-Ross-Shanken test was used to test the model validity, and the optimal model for each group was extracted. Our findings show that after analysing the optimal models within each group, it becomes evident that systematic risk indeed exerts an influence on both dividend-paying and non-dividend companies. Nevertheless, when considering four specific systematic risks (inflation, exchange rates, crude oil and interest rates), this study’s findings establish that these risks do not significantly impact the stock returns of any company group across all time periods. As for idiosyncratic risks, firm size and book-to-market factors emerge as substantial influencers across all firms. Additionally, market sentiment significantly affects the stock performance of small-sized dividend-paying companies.

Item Type: Article
Keyword: Asset pricing, China A-shares, Dividend, Market sentiment, Systematic risk
Subjects: H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography
H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation
Department: FACULTY > Labuan Faculty of International Finance
Date Deposited: 06 Mar 2024 15:43
Last Modified: 06 Mar 2024 15:43
URI: https://eprints.ums.edu.my/id/eprint/38455

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