Economic impacts of regulatory decisions on reit dividend distribution

Abstract

Real estate investment trusts (REITs) have recently gained prominence in the capital market. From an accounting point of view, the Maxi Renda Trust (MXRF11) has been the subject of recent discussions and contradictory decisions within the scope of the Brazilian Securities and Exchange Commission (CVM) regarding the calculation basis for the dividend distribution. In this context, we sought to investigate the economic impacts of fair value measurement under the framework of CVM’s decisions in the Maxi Renda Trust and to verify how the theory of regulation can explain regulatory body decisions. The trust income for the period from 2015 to 2021 was restated based on the cash basis, used by the trust, and the accrual method, determined by the CVM, in order to identify differences in the amount of income that would be distributed with the change in the methodology issued by the regulatory agency. Also, an analysis of CVM’s decisions and the trust’s administrator’s arguments was also conducted, to identify elements that could be correlated with the regulatory body’s performance under the aspects of the theory of regulation. As a result, it was demonstrated that there is an economic impact on the minimum income calculated to be distributed by the trust between the two methodologies (cash and accrual), with smaller amounts for distribution considering the accrual basis, which exclude revenues and expenses that do not transit through cash, as is the case of fair value measurement. CVM’s decisions may have resonance in the public interest theory so that the regulatory body’s performance was aimed at protecting the investor, even though it may have suffered pressures exerted by interest groups or even captured by the regulated parties since it changed the initial understanding of the case. Besides the theoretical contribution, with the possibility of expanding studies on the applicability of accounting standards related to the measurement of fair value in investment trusts and their economic impacts, the study applied to the Maxi Renda Trust provides a better understanding of the topic to subsidize investors regarding decision making on investments in this type of trust.