Dividend Policy of Russian Companies: Empirical Models

Abstract

The paper is aimed at empirical modelling of dividend policy of Russian firms subject to the fundamental problem of information asymmetry. Special attention is paid to the link between dividend policy and two main factors influencing agency costs, which are ownership structure and corporate governance. This paper is one of the first studies which include both ownership structure and corporate governance in the model of dividend policy without merging them into one factor. Ownership structure modelling is based on the assumption that different types of shareholders may influence dividend policy in dissimilar ways. Several types of investors are analyzed, including government, management and the board, as well as foreign, corporate and offshore shareholders. Corporate governance is measured using original index developed by the authors. In this paper two types of decisions on dividend policy are analyzed. The first one is binary, and the question is whether to pay dividends. The second type of decision is how much to pay. The results of the research show that dividend policy is affected not only by financial factors, but also by non-financial, such as ownership structure and corporate governance. Moreover, the empirical results of this paper confirm the hypothesis that these two non-financial factors are interrelated and influence dividend policy simultaneously, but separately. This result is of special interest, taking into account the fact that most of the previous studies did not pay enough attention to differently directed correlations between corporate governance and equity stakes, and thus their potentially different influence on dividend policy.