Abstract: Cash dividend policy of listed companies, a policy which decides the distribution or retention of profit, plays a crucial role in the management of the company. In this paper, using investment efficiency as a moderating variable, the samples are divided into two groups: overinvestment group and underinvestment group. The cash dividend policies are divided into three groups: skimpy dividend, moderate dividend and excessive dividend. This paper studies the interaction relationship between cash dividend policy and investment efficiency and the impact on investor returns of different combination of cash dividend policy and investment efficiency. For underinvested companies, the study shows excessive dividend and skimpy dividend both have negative effect on investment efficiency and return of investors through loss of investment efficiency. Only by moderate dividend, the underinvestment could be reduced. For overinvested companies, skimpy dividend is harmful for investment efficiency and has negative impact on return of investors through moderating effect of investment efficiency. Excessive dividend will reduce overinvestment and increase return of investors through moderating effect of investment efficiency. The research is a supplement for corporate dividend study and could be helpful for the managers of companies to make dividend policy.

Key words: cash dividend distribution, investment efficiency, short-term investment returns, long-term investment returns