Cash dividends, return on equity and earnings persistence

Figures & data

Table 1. Sample selection, sample number deleted and illustration of deleted reasons.

Sample firms before deleted	Sample firms deleted	Remained sample firms after deleted	Sample selection and deletion instructions
1966	207	1759	There are 1966 A-share listed firms with quarterly earnings data in 2011, after deleting firms with less than 40 times quarterly earnings, 1759 firms remained.
1759	264	1495	Delete the firms whose residuals do not converge to zero or extremely unstable.
1495	10	1485	Delete firms with negative total net assets from 2011 to 2020. If net assets are negative, the ROE is meaningless.
1485	268	1217	Delete firms with negative profit from 2011 to 2020. The negative ROE is not consistent with the premise in this article.
1217	330	887	Delete 330 firms with incomplete return on investment or share price. Delete enterprises. Since there are 330 firms whose quarterly return on investment or stock price at the beginning of the period do not exist, the earnings response coefficient cannot be calculated, so these 330 firms are deleted.
887	15	872	Delete 15 firms whose RPer value is extremely small with negative value. Since when the return on net assets or ROE is near to zero, the RPer values may be close to negative infinity, so we delete 15 firms whose RPer value is extremely negative. The minimum value is −195.87 and the maximum value is −13.03.

Source: Authors’ calculation.

Table 2. Descriptive statistics of the unexpected earnings response coefficient, Per, RPer.

Variables	Valid sample	Min.	Max.	Mean.	Standard deviation
Unexpected earnings response coefficient	872	−136.30	58.69	1.71	8.93
Per value	872	5.55	129.90	17.20	8.61
RPer value	872	−11.47	0.77	−0.96	1.78
ROE	872	0.00	0.10	0.02	0.01
Dividends payout ratio	872	0.00	0.46	0.09	0.06
b1j	872	−1.60	0.56	−0.66	0.27
b2j	872	−1.94	0.48	−0.55	0.28
b3j	872	−1.39	0.58	−0.40	0.27
b4j	872	−0.96	0.72	−0.03	0.25

Source: Authors’ calculation.

Table 3. The univariate regression results of Per, RPer and unexpected earnings response coefficient.

Panel A: Univariate regression
Regression equation	${\alpha }_{0j}={\xi }_0+{\xi }_{1}Pe{r}_j+{\epsilon }_j$			${\alpha }_{0j}={\psi }_0+{\psi }_{1}RPe{r}_j+{\epsilon }_j$
Regression coefficient	${\xi }_0$	${\xi }_1$	Adj_R^2	${\psi }_0$	${\psi }_1$	Adj_R^2
Regression results	1.320* (1.95)	0.0228 (0.65)	−0.001	2.149*** (6.27)	0.453*** (2.68)	0.007
Sample numbers	872			872
Panel B: Test of empirical p value
Coefficient differences (${\psi }_1-{\xi }_1$)	0.430***
Empirical p value	0.000

Note: t-statistics are shown in parentheses. Significance (two-tailed) at the 0.1, 0.05 and 0.01 levels are indicated by *, ** and ***, respectively.

Source: Authors’ calculation.

Table 4. The combined regression results of Per, RPer and unexpected earnings response coefficient.

Regression equation	${\alpha }_{0j}={\omega }_0+{\omega }_{1}Pe{r}_j+{\omega }_{2}R\mathit{Per}+{\epsilon }_j$
Regression coefficient	${\omega }_0$	${\omega }_1$	${\omega }_2$	N	Adj_R^2	VIF
Regression results	1.854*** (2.63)	0.0169 (0.48)	0.448*** (2.64)	872	0.006	1.00

Note: t-statistics are shown in parentheses. Significance (two-tailed) at the 0.1, 0.05 and 0.01 levels are indicated by *, ** and ***, respectively. According to the VIF value (less than 2), multicollinearity does not pose an issue for the analysis.

Source: Authors’ calculation.

Table 5. Descriptive statistics based on the characteristic classification of dividends payout rates.

Dividends payout rate	N	Unexpected earnings response coefficient				Per value		RPer value			ROE			Dividends payout rate
		Min.	Max.	Mean	Min	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean
Low DPR group	21	−11.11	23.29	1.64	7.96	19.43	14.23	−5.78	0.59	−2.38	0.00	0.06	0.01	0.00	0.00	0.00
Medium DPR group	830	−136.25	58.69	1.68	5.55	129.89	17.27	−10.60	0.77	−0.82	0.00	0.10	0.02	0.00	0.23	0.08
High DPR group	21	−10.01	19.64	2.97	8.56	39.75	17.42	−11.47	0.47	−5.28	0.00	0.05	0.01	0.23	0.46	0.32
Total sample	872	−136.25	58.69	1.71	5.55	129.89	17.20	−11.47	0.77	−0.96	0.00	0.10	0.02	0.00	0.46	0.08

Source: Authors’ calculation.

Table 6. The combined regression results based on dividends payout ratio classification.

Dividends payout rate (DPR)	N	Intercept (${\omega }_0$)	Per (${\omega }_1$)	RPer (${\omega }_2$)	Adj_R^2	VIF
Zero DPR group	21	13.52** (2.18)	−1.049** (−2.56)	−1.283 (−1.64)	0.264	1.01
Medium DPR group	830	1.938*** (2.69)	0.0147 (0.41)	0.623*** (3.12)	0.010	1.02
High DPR group	21	1.519 (0.31)	0.227 (1.22)	0.473 (1.08)	0.11	1.03
Total sample	872	1.854*** (2.63)	0.0169 (0.48)	0.448*** (2.64)	0.006	1.00

Note: t-statistics are shown in parentheses. Significance (two-tailed) at the 0.1, 0.05 and 0.01 levels are indicated by *, ** and ***, respectively. According to the VIF values (all less than 2), multicollinearity does not pose an issue for the analysis.

Source: Authors’ calculation.

Figure 1. Multiple box plots of Per value and RPer value with different dividend payout ratio (from low to the high).

Source: Authors’ calculation.

Table 7. Descriptive statistics by characteristics of firms’ ROE.

ROE (from low to high)	N	Unexpected earnings response coefficient			Per value			RPer value			ROE			Dividends payout rate
		Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean
1	175	−136.25	42.85	1.58	5.55	74.37	16.43	−11.47	−1.65	−3.81	0.00	0.01	0.01	0.00	0.46	0.11
2	175	−47.32	24.48	1.31	7.30	43.46	16.35	−1.65	−0.58	−1.02	0.01	0.02	0.01	0.00	0.33	0.08
3	174	−12.76	58.69	2.19	8.15	129.89	17.49	−0.57	−0.14	−0.33	0.02	0.02	0.02	0.00	0.23	0.07
4	174	−46.07	52.63	1.18	6.37	53.15	16.34	−0.14	0.14	0.01	0.02	0.03	0.02	0.01	0.22	0.08
5	174	−20.99	37.06	2.30	6.21	59.97	19.39	0.15	0.77	0.34	0.03	0.10	0.04	0.00	0.26	0.09
Total sample	872	−136.25	58.69	1.71	5.55	129.89	17.20	−11.47	0.77	−0.96	0.00	0.10	0.02	0.00	0.46	0.08

Source: Authors’ calculation.

Figure 2. The multiple box plots of Per and RPer with different R.O.E. (from low to the high).

Source: Authors’ calculation.

Table 8. Descriptive statistics based on firm size characteristics (sales) classification.

Size (from low to high)	N	Earnings response coefficient			Per value			RPer value			ROE			Dividends payout rate
		Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean	Min.	Max.	Mean
1	175	−47.32	52.63	1.91	5.55	74.37	15.45	−9.98	0.59	−1.46	0.00	0.06	0.02	0.00	0.45	0.08
2	175	−46.07	53.12	2.65	6.21	53.15	16.49	−11.47	0.71	−1.16	0.00	0.08	0.02	0.00	0.46	0.09
3	174	−136.25	34.10	1.37	7.30	49.86	17.21	−10.60	0.63	−1.06	0.00	0.06	0.02	0.02	0.30	0.09
4	174	−12.59	58.69	1.98	6.37	129.89	17.91	−7.50	0.77	−0.55	0.00	0.10	0.02	0.00	0.33	0.08
5	174	−13.01	25.90	0.64	7.30	59.26	18.94	−8.29	0.69	−0.58	0.00	0.07	0.02	0.00	0.46	0.08
Total	872	−136.25	58.69	1.71	5.55	129.89	17.20	−11.47	0.77	−0.96	0.00	0.10	0.02	0.00	0.46	0.08

Source: Authors’ calculation.

Table 9. Combined regression results of Per, RPer and unexpected earnings response coefficient.

Size	N	Intercept (${\omega }_0$)	Coefficients for Per value (${\omega }_1$)	Coefficients for RPer value (${\omega }_2$)	Adj_R^2	VIF
High-sales	436	2.375* (1.69)	0.0417 (0.55)	0.710*** (2.60)	0.012	1.02
Low-sales	436	1.129* (1.87)	0.0143 (0.50)	0.157 (0.85)	−0.002	1.12
Total sample	872	1.854*** (2.63)	0.0169 (0.48)	0.448*** (2.64)	0.006	1.00

Note: t-statistics are shown in parentheses. Significance (two-tailed) at the 0.1, 0.05 and 0.01 levels are indicated by *, ** and ***, respectively. Since all of the VIF are near to 1 (less than 2), multicollinearity does not pose an issue for the analysis.

Source: Authors’ calculation.