Option-style Dividend Regulatory Policy and Corporate Investment Efficiency

Establishing a sound dividend mechanism serves as a crucial pathway to mitigating short-term speculative behaviors in capital markets and safeguarding investors’ rights and interests. Enhancing investment efficiency forms the foundation for companies to cultivate sustainable dividend distribution capacity and to establish robust long-term investor protection mechanisms. Utilizing a sample of non-financial listed companies from the Shanghai and Shenzhen A-share markets from 2011 to 2015, and leveraging the quasi-natural experiment provided by the Shanghai Stock Exchange Cash Dividend Guidelines for Listed Companies implemented in 2013, this study examines the impact of the option-style dividend regulatory policy on corporate investment efficiency, and further analyzes how corporate choices regarding dividend distribution or enhanced disclosure, within the bounds permitted by the regulatory policy, affect the mitigation of inefficient investment. The findings indicate that the implementation of the option-style dividend regulatory policy significantly improves corporate investment efficiency, specifically by effectively mitigating underinvestment, but does not have a significant effect on curbing overinvestment. Mechanism tests reveal that both dividend payments and disclosure practices mitigate underinvestment by easing financing constraints and enhanceing information transparency. Heterogeneity analysis shows that the positive effect of the option-style dividend regulatory policy on corporate investment efficiency is more pronounced in regions with lower marketization levels or among smaller companies.