Corporate Diversified Equity Investment and Dividend Policy

For a company with Large long-term diversified equity investment (referred as "equity-investment-oriented company"), consolidated earnings and cash flow cannot be all dominated by the parent company. However, parent company's own earnings and cash flow are the real basis of dividend payment. For this reason, the distribution of earnings and cash flow between the parent company and subsidiaries (referred as "the distribution of liquidity") should be considered in the decision of dividend policy. Study found that the dominant of diversified equity investment affect the distribution of liquidity; for listed companies with larger equity investment, subsidiaries tend to dominate more earnings and cash flow; subsidiaries dominating more earnings and cash flow usually tend to deliver less earnings and cash to parent company, resulting in a lower probability of patent company paying dividends to shareholders.