Abstract: Diversification may not only ease the financing constraints of the company by constructing an internal capital market, but also worsen the agency conflict due to the complicated organizational structure and then act on the company′s cash dividend policy. This paper takes the balanced panel data of A-share listed companies from 2003 to 2016 as a sample, and finds that diversification is one of the important factors affecting the cash dividend policy. The agency conflict that it generates is the main mechanism affecting cash dividend policy, but the improvement of the governance environment can inhibit the agency conflict, weaken or even eliminate the negative impact of the diversification on cash dividend payment propensity and level; further research using the mediation effect model finds that agency conflict also played a mediating role between diversification and cash dividend policy. Therefore, for diversified companies, they should pay more attention to the improvement of corporate governance structure. Other investors and regulatory authorities should pay attention to preventing the company from turning diversification into the means and tools for the company′s controlling shareholders or management to seek personal gain.

Key words: diversification strategy, financing constraints, agent conflict, cash dividend policy, mediating effect