Determinants of Dividend Payments of Russian Companies

Svetlana  Shapovalova

doi:10.17323/j.jcfr.2073-0438.17.1.2023.54-63

Svetlana Shapovalova Alfa-Bank, Moscow, Russia https://orcid.org/0000-0001-5405-4336

DOI: https://doi.org/10.17323/j.jcfr.2073-0438.17.1.2023.54-63

Keywords: dividends, dividend policy, dividend yield, stock market, agency theory, behavioral theory, business life cycle, life cycle theory, client theory, Russian markets, developing markets

Abstract

The Russian stock market is one of the leaders in terms of dividend yield among developed and developing countries. Against this background, it is appropriate to study the determinants that affect the decisions on the implementation of payments and their amount. The literature on this topic in emerging markets in general and specifically in Russia has a
number of gaps and contradictions that determine the scientific novelty of the work – the analysis in regard to the impact on the probability of payments and on dividend yield is carried out simultaneously; contradictory determinants are examined.

In emerging markets, the relationship between dividends and the age of members of the Board of Directors and the personal income tax rate on dividends is taken into account, and specifically in Russia – their relationship to the number of members of the Board of Directors, the ownership stake of the CEO and institutional shareholders, the company’s life cycle stage (LC), the dual role of the chairman of the Board of Directors and executive director. The study is conducted on the 2012–2019 data for a sample of 40 companies listed on the Moscow Exchange. The method incorporates two regression models – a linear one with random effects and a probit model. As a result of the analysis, the manifestation of the agency
effect in the Russian market was confirmed by a significant positive dependence of the probability of payments on the dual role of the chairman of the Board of Directors and the executive director, the portion of shares held by the CEO, a significant negative relationship with the number of members of the Board of Directors and liquidity. The agency and behavioral effects are confirmed by a significant positive relationship between the probability of payments and the age of the members of the Board of Directors and a significant negative relationship with profitability. The influence of client effects is confirmed by a significant positive relationship between profitability and the personal income tax rate on dividends, as well as between the probability of payments and the share of institutions in ownership. It is also confirmed that companies that are mature in terms of the life cycle stage are more likely to pay dividends and do it more often. In general, there is a more significant influence of non-financial variables on the probability of payments and of financial variables on profitability.

The results of the study can be used by private investors, banks, investment funds and brokerage companies to form expectations for companies’ dividend yield and the probability of payments with regard to the specifics of the Russian market.

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