Chinese listed companies have raised 4.3 trillion yuan in the past 21 years, while common shareholders have received a total dividend of only 0.54 trillion yuan.
The Economic Information Daily reported (by reporters Cai Ying and Wu Liwu) that over the past decade, China's economy has maintained an average growth rate of 10.48%, and the overall performance of Chinese listed companies has been better than other enterprises. Meanwhile, after experiencing a brief surge, China's stock market has continued to be vibrant, seemingly becoming a reverse indicator of the "barometer of the national economy." What has caused such a huge disparity?
To find the reasons for this disparity, our newspaper organized reporters to start from the perspective of the "stock market ecology" and conducted interviews and research with listed companies, investors, intermediaries, and industry experts, hoping to confront the current ecological crisis of China's stock market while promoting the market's return to its original position and truly play a role in optimizing resource allocation.
Starting from today, our newspaper will publish this series of survey reports one after another.
Despite being across the river from the famous Bund in Shanghai, even the most pleasant scenery cannot conceal the pessimistic sentiment of the exchange. Similarly, the Shenzhen Stock Exchange, located opposite the Diwang Tower on Shenan Avenue, is filled with sighs from institutions. "The market has fallen quite heavily recently, which has greatly affected our performance, but we still have to do what needs to be done," said a trader helplessly.
However, for companies preparing for IPOs, the sluggish market has not dampened their enthusiasm for going public and raising capital. Statistics show that from 1990 to now, domestic A-shares have cumulatively raised 4.3 trillion yuan. But how much dividends have these listed companies returned to investors? According to Wind data, from the end of 1990 to the end of 2010, A-shares cumulatively distributed about 1.8 trillion yuan in cash dividends. However, a senior securities analyst estimates that the equity ratio of ordinary investors in listed companies does not exceed 30%, and their share of dividends is at most 0.54 trillion yuan. In other words, ordinary shareholders who spent 4.3 trillion yuan in real money participating in the financing activities of listed companies received dividends of no more than 0.54 trillion yuan. This means that in nearly 21 years, the total amount of cash dividends given by the A-share market to ordinary investors accounted for less than 13% of the total financing amount. If calculated at the current one-year deposit interest rate of 3.5% compounded, the savings return over 21 years would reach as high as 105.9%.
Experts interviewed by The Economic Reference Newspaper believe that listed companies only know how to raise money but not return it, which has become one of the most pathological and hated phenomena in the A-share market. The lack of shareholder return culture in listed companies has become an important reason for strangling ordinary investors, leading to the prevalence of speculative trends, and constraining the healthy development of China's capital market.
There are many "iron roosters" who love money like life.
For listed companies, the capital market may be the best "ATM machine." "On the one hand, new stocks keep coming out to drain blood, and on the other hand, listed companies crazily raise money again," wrote independent financial commentator Cao Zhongming.
According to statistics from the CSRC, from 1990 to July 2011, the cumulative financing amount of domestic A-shares, including initial public offerings, additional issues, and rights issues, reached nearly 4.3 trillion yuan, of which the amount of refinancing was about 2 trillion yuan.
Based on Wind data, the reporter made a preliminary estimate: from 1990 to the end of 2010, A-shares cumulatively distributed approximately 1.8 trillion yuan in cash dividends (after deducting dividend income tax). However, it must be noted that ordinary investors who contributed 4.3 trillion yuan hold a smaller proportion of shares in listed companies, and they receive a smaller portion of the dividends.
Wind data shows that the number of shares issued through IPOs in the domestic stock market accounts for only 11% of the total pre-IPO share capital. "Generally speaking, the proportion of freely tradable shares after the initial public offering and refinancing (including rights issues and additional issues) does not exceed 30% of the total share capital," admitted a senior securities analyst. This analyst estimated that based on a 30% holding ratio of ordinary investors, the cash dividends received by ordinary shareholders out of the total 1.8 trillion yuan in cash dividends distributed by listed companies did not exceed 0.54 trillion yuan.
Moreover, domestic ordinary investors also bear "stamp duty," transaction commissions, etc., and these transaction costs sometimes even exceed the dividends. According to CSRC data, from 1990 to 2010, the total cumulative stock transaction commission in the A-share market was about 400 billion yuan, and the total stamp tax on stock transactions in the A-share market was about 600 billion yuan. This means that in the entire A-share market over the past 21 years, the transaction cost for ordinary investors was around 1 trillion yuan.
Of course, due to policy constraints imposed by regulators in recent years, the number of companies distributing cash dividends has increased somewhat, but there are still many "iron rooster"-style listed companies that refuse to distribute dividends generously. According to statistics from Fudan University's Securities Research Institute, from 2005 to 2009, the proportion of listed companies implementing cash dividends among all listed companies was 45%, 50.22%, 51.85%, 52.35%, and 48.52%, respectively. In 2010, out of 2175 listed companies, only 117 were loss-making, but there were as many as 798 "iron roosters" that neither distributed dividends nor gave bonus shares. Additionally, by the end of 2010, there were as many as 414 companies that had been listed for more than 5 years and had never distributed dividends within the last 5 years, of which 136 were profitable companies, accounting for as high as 32.85%. Among them were popular stocks such as Jinma Shares, Haiwang Bioengineering, and Tonghua Dongbao.
Even worse, many listed companies actually use funds raised through refinancing to distribute dividends to investors. Researchers Liu ShuLian and Hu YanHong from Northeastern University of Finance and Economics pointed out in their paper "Empirical Analysis of Cash Dividends of Listed Companies in China" that company dividends generally do not exceed book profits, but a considerable part of companies' per-share cash dividends exceed their per-share equity free cash flow, meaning that these dividends come from rights issue financing, and the money raised becomes the source of cash dividends.
The face of pure money-raising is revealed without reservation.
Another strange phenomenon accompanying low dividends is: various financing activities continue endlessly, ST-class zombie companies keep performing the myth of "never dying," and executives of listed companies experience wave after wave of cashing out. Although the domestic stock market has remained sluggish for several months recently, Shaanxi Coal Industry Co., Ltd. still successfully passed the listing review in late August. The company plans to issue 2 billion shares and raise 17.251 billion yuan. Previously, China Hydropower Engineering Group Corporation also successfully passed the listing review, planning to issue 3.5 billion shares and raise 17.3618 billion yuan, which could become the largest IPO project of the year if successful. Statistics show that in the first half of this year, the A-share market issued 164 new shares, 12 fewer than the 176 issued last year; actual IPO fundraising amounted to 160.775 billion yuan, a decrease of 24.60% compared to 213.228 billion yuan during the same period last year. However, from the issuance of new shares in August, a total of 23 new shares were issued. From September 5 to September 9, another 8 new shares, including Bawang Water Treatment, Tongguang Optical Cable, etc., started the issuance process. Moreover, many heavyweight super-large-cap stocks repeatedly finance and refinance uncontrollably. On September 9, China Merchants Bank passed the "A+H" rights issue plan, with a maximum financing scale of up to 35 billion yuan. Some analysts indicated that major banks would have a capital shortfall of 400 billion to 500 billion yuan in the next five years, making bank stock refinancing an inevitable trend.
In addition to endless money-raising, some ST-class zombie stocks often perform the "never-dying myth" in the A-share market, fully exposing the face of pure money-raising. Statistical data shows that as of June 30, 2011, there were 19 listed companies with net asset value per share (after deducting minority interests) below -1 yuan. These long-term severely insolvent "shell companies" have developed extraordinary "survival skills." For example, *ST Zhonghua A has had a record of 9 years of losses and 2 years of slight profits since its listing: losses in 1997 and 1998; profit in 1999; losses in 2000 and 2001; slight profit in 2002; losses in 2003 and 2004; slight profit in 2005; loss in 2006; slight profit in 2007; losses in 2008 and 2009; profit in 2010. Thus, this stock has never touched the delisting red line of "continuous three-year losses."
Some executives of listed companies resort to any means to make money from the capital market. Wind statistical data shows that since 2011, A-share listed companies have experienced a total of 2,117 executive reductions, with a total reduction of 790 million shares involving a market value of approximately 12.6 billion yuan.
In the A-share market, the lack of shareholder return culture has become the most hated and criticized phenomenon. "The core content of equity culture is the concept of shareholder sovereignty." Liu Junhai, Director of the Commercial Law Institute at Renmin University of China, who participated in the research, drafting, and revision of commercial economic laws such as the Company Law and the Securities Law, stated that shareholder sovereignty thoroughly confirms the status of shareholders as masters in corporate governance, comprehensively respecting the various rights and interests enjoyed by shareholders according to law and articles of association, especially the rights to information, decision-making participation, profit-sharing, supervision, and equity transfer. "This means that the stock market is no longer just a tool for listed companies and issuers to raise money, but a treasure pot where investors obtain investment returns and share in the healthy development of China's capital market and national economy," Liu Junhai believes that the game rules of A-shares, which emphasize financing over investment and focus on raising money rather than returns, must change, and the banner of "emphasizing investment, protection, and returns" should replace it and fly high.
Emphasizing financing over returns distorts the stock market system
A healthy capital market should possess both financing and investment functions. The "out-of-place" occurrence of either function will inevitably affect the development of the market itself.
"The overall level of cash dividends of listed companies is too low, and the dividend payout ratio of the domestic market is only 20% to 30%, while the dividend payout ratio of overseas mature markets is normally between 40% and 50%," said Li Daxiao, Director of the Research Institute of Yingda Securities.
In Western mature markets, listed companies all have transparent dividend policies and long-term dividend methods. Stocks of General Motors, Coca-Cola, Alcoa, and others have maintained certain amounts of dividends for decades, and their stocks are held long-term by investors who balance fixed income and growth value. In the "BRIC countries," Brazil's corporate law requires joint-stock companies to stipulate in their articles of association that a certain percentage of annual profits must be distributed as cash dividends, and the proportion must not be less than 25% of profits.
In fact, there are few high-growth companies in the A-share market, and the performance of growth-oriented companies after listing is far from satisfactory. Zhao Changwen, Director of the Enterprise Research Institute of the Development Research Center of the State Council, believed this to be "the sorrow of China's capital market." Investigating the causes, on the one hand, the current issuance review system in China carries the risk of "adverse selection," typically manifested in the inability of a large number of high-growth, quality enterprises like Baidu and Tencent to enter the A-share market. On the other hand, after enterprises go public, due to the imperfections of China's capital market, it fails to provide the corresponding management mechanism for the benign growth of enterprises, and the management or controlling shareholders may have "moral hazards." Simultaneously, the uneven development of industries also leads to differences in dividends.
"To completely change this situation, the dividend mechanism is an important aspect, and improvements in other areas of the capital market are also needed, such as optimizing the investor structure," Zhao Changwen believed, "Currently, the investor structure of the A-share market has two distinct characteristics: a relatively larger proportion of short-term investors and a relatively smaller proportion of institutional investors. Short-term investors rarely incorporate dividends into their investment decisions, making them insensitive to the dividend decisions of listed companies. Therefore, a higher proportion of short-term investors implies a certain degree of failure in the voting mechanism. With a smaller proportion of institutional investors, shareholder activism finds it difficult to play a role in the macro-management of listed companies."
"Various ST stocks dominating the market will surely incite crazy speculation, turning worthless junk stocks into chips in gamblers' hands, seriously distorting the entire A-share valuation system, thereby causing the entire stock market to completely lose its resource allocation function and economic barometer function," said Dong Dengxin, Director of the Financial Securities Research Institute of Wuhan University of Science and Technology.
"In a certain sense, the regulatory policy has problems," said Liu Jipeng, Director of the Capital Research Center of China University of Political Science and Law, to The Economic Reference Newspaper. Regarding the Growth Enterprise Market (GEM), the extremely serious problem of high-priced IPOs among the 258 GEM-listed companies remains unresolved. Despite the market already showing disapproval, the average issue price-earnings ratio of the 258 GEM-listed companies remains as high as 66 times, with an average issue price of 33 yuan per share. "These executives have all become frenzied tycoons, and the GEM has caused systemic harm to China's capital market, misleading Chinese entrepreneurs and turning them from good, simple innovators into unrighteous people who have strayed from the right path," he said.