Agency Behavior and the Policy of Cash Dividend

This paper studied the relationship between agency behavior and the policy of cash dividend by stochastic-optimal-control model. Based on the classical dividend discounted methods in finance, at first the stochastic-optimal-control model gives the benchmark in which we do not consider the agency behavior, and then we add the private profit into the model to study how the agency behavior influences the policy of cash dividend. The conclusion reveals that the cash dividend payoff level under agency behavior is more than under non-agency behavior, but the growth rate of cash dividend under agency is lower than under non-agency behavior, then the growth rate of cash dividend could be looked as the signal of agency behavior. Then we test the conclusion by regression model, the outcome reveals that the agency behavior is the main reason of the declining growth rate of cash dividend, and the outcome of hypothesis testing reveals the growth rate of cash dividend would be more than zero when there does not exist agency behavior.