The case concerns dividend policy at Fuyao Glass Industry Group, Ltd., the leading manufacturer of auto glass in China and the world’s second-largest manufacturer of auto glass (early 2015). Fuyao was controlled by Cho Tak Wong, a man of humble, rural origins with little formal education, whose success came from business acumen, a strong service ethic, commitment to lifelong learning, industry focus, and good fortune.
Cho had been recognized as a leading philanthropist (2010) and EY Entrepreneur of the Year (2008 China). Fuyao had relatively modest cash balances but strong cash flows. Domestically, the company had little opportunity for investment, but Cho wished to become the leading auto-glass company in the world, so Fuyao was getting ready to enter production in both the United States and Russia. To raise the required capital, Fuyao was scheduling a global initial public offering (IPO) of its shares in Hong Kong (2015).
Cho had to decide, in early 2015, the size of its dividend distribution and whether Fuyao should change its residual, fluctuating dividend policy in light of it IPO.
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