Dividend policy has always been a hot spot in the field of financial management. How to work out the proper dividend policy and distribute the earnings reasonably between company internal retention and the shareholders is a vital practical problem for managers of listed companies. Yet it is all unsolved problem of financial theory. After two decades development, securities market of China has achieved great success. However it should be paid attention that it is still very young compared to mature markets of western developed countries. it has a lot of different characteristics. There are also a number of urgent problems that need be solved. Dividend policy of listed companies is one of the problems that are quite notable.After the review of dividend policy theory in domestic and abroad, with the method of comparative analysis. This paper described in detail the status and characteristics of China's securities market before and after the reform of non-tradable shares. 1667 samples of listed companies in Shanghai Stock Exchange which have already taken the non-tradable shares reform are selected in the years of 2006-2015. Using cumulative abnormal returns method, this paper empirical studies the market reaction of different dividend payments. The results show that dividend-paying stocks exhibit significantly positive abnormal returns while non–dividend-paying stocks show a negative announcement effect. Furthermore, I document that the cumulative abnormal returns for stock dividends and combined dividends are the main drivers of this announcement effect. In contrast, cash dividend stocks experience no significant price run-up before announcement. The significant announcement effect of stock dividends is robust in controlling the earnings Surprisee effect. The effectiveness of China's securities market has increased after the non-tradable shares reform. But there is still a long way to go compared to the mature markets of western developed countries which emphasis on cash dividend.Finally, based on the empirical results, this paper gives suggestions to the related parties. Listed companies should balance company's sustainable development and the expectations of investors. Securities regulators should play the nonaligned role in the market. Investors should enhance their value orientation investment philosophy.KEY WORDS: Dividend Policy, Stock Dividends, Market Reaction, Earnings Surprisee, Cumulative Abnormal Returns.