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China's listed firms begin paying investors more: CSRC

By Li Zhenyu (People's Daily Online)

16:43, June 08, 2012

BEIJING, June 8 (People's Daily Online) -- The listed companies in China have begun paying investors more in return, the top securities regulator said recently.

The issue that some listed companies with an outstanding performance consistently pass the dividend has become quite a hot topic in China.

The China Securities Regulatory Commission (CSRC), China's top securities regulator, recently remarked on the issue in a statement.

The CSRC has made rules and regulations to supervise and restrain the listed companies' sharing out bonus and attached great importance to guide the listed companies about matters of paying their shareholders in return, said the top regulator in the statement.

In recent years, the listed companies' consciousness of sharing out bonus is gradually strengthening and they began paying investors more in return, the CSRC said.

Due to historical reasons, the mechanisms of the constraints on capital stocks and the returns on investment are still relatively weak, said the CSRC. "Some listed companies are less willing to share out bonus and they lack the consciousness of paying shareholders in return."

This mainly shows as follows, according to the CSRC:

First, the overall dividend payout ratio is low, with cash dividend payout ratio accounting for only about 25 percent of the net profits of the listed companies from 2001 to 2011, while the proportion of mature international market is usually about 40 percent;

Second, the dividend distribution takes no account of cash dividends, with the proportions of cash dividend payout ratio to net profits of listed companies respectively being about 42 percent, 36 percent and 30 percent in the last three years. The proportion of cash dividends is predicted to be increased in 2011;

Third, a considerable number of companies do not disclose in detail the specific reasons why they did not share out bonus.

All of these have caused negative impact on the overall image of the listed companies and affected the market sentiment and investor confidence, the CSRC said.

The securities regulator went on to explain why some listed companies in China are reluctant to share out bonus.

"According to the 'Company Law', the profit distribution belongs to the autonomous decision-making matters of the listed companies and only the board of directors and board of shareholders have the right to decide whether to share out bonus," said the CSRC.

However, the CSRC said that it will encourage and guide them to establish the consistent, clear and transparent decision-making mechanism and dividend policy, on the basis of "respecting for the listed companies' independent operation".

The CSRC's specific measures include:

- Asking the IPO companies to disclose the profit distribution information in the prospectus;

- Clarifying the position and attitude of independent directors and external supervisors;

- Guiding the listed companies to define the plan of paying shareholders in return,

- Reducing the operating costs of listed companies about dividends;

- Strengthening the supervision and inspection on the decision-making process, implementation and information disclosure of cash dividends of listed companies.

"It is quite possible that these measures will play a positive role in resolving the issue," the CSRC said.


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