The “dividend puzzle” and the Russian stock market. Part 1

Abstract

This article analyzes the key patterns of the dividend policy and the problem of the “dividend puzzle” in the general context of the development of the stock market in Russia. The article consists of two parts.In the first part we summarize main research trends of dividend policy in modern economic theory (the classical Modigliani—Miller theory of dividend irrelevance, agent and signal hypotheses, the smoothing model, the catering theory, etc.). We emphasize the theoretical analysis of motivation of the largest Russian companies for profit allocation and dividend payout, based on a sample of 236 joint stock companies. Since 2012, a steady increase in dividend payments has been revealed in both private and state-owned enterprises (SOEs). The bulk of dividend payments from SOEs accounts for only 12 major companies. Along with an increase in the market value, dividends have become an important factor in the total return on shares. Under current conditions, the probability of paying dividends depends not only on the size of the company and indicators of its’ financial stability, but also on the presence of the state in the capital of companies. However, the relationship between the probability of paying dividends and state participation in the ownership structure is not universal and can be explained by specific factors that go beyond the classical dividend theories.In the second part we will analyze the patterns of stock market performance and dividend policy of the largest Russian companies, motivation for dividend payouts and special aspects of SOEs policy.