Board of Directors and Dividend Policy in Russian Companies with Direct State Ownership

Abstract

In this article the authors investigate how shareholders of Russian companies with state ownership realize their preferences regarding the dividend payments, and the factors that determine the dividend policy of these companies. Board of Directors as a key corporate governance body is a representative of shareholders and serves as an intermediary between shareholders and the company's management. In this paper the authors conduct an empirical analysis of the relationship between the characteristics of the boards of directors and dividend policy of the Russian companies with direct state ownership. The sample includes 633 Russian open joint-stock companies with state participation, which were included in the Federal Property Agency registry and had been operating in 2009-2012, in a period that was characterized by the incomplete process of changes in the corporate governance of state-owned companies, including their dividend policy and the Board of Directors. The authors tested the existence of evidence in favor of outcome model of dividend payments. The authors found a direct relationship between the dividend payout ratio on ordinary shares and the share of independent directors, proportion of professional attorneys on the Board, and an inverse relationship with the proportion of executive directors. At the same time the study did not reveal the relationship between the dividend payout ratio on ordinary shares and the board size, as well as the share of state representatives on the board.