The Relationship between Ownership and Dividends: Evidence from East European and Russian Companies

This article shows whether dividend policy depends on various characteristics of the ownership structure. It is expected that ownership concentration, type of majority owner and insider ownership can explain size of dividends paid. Using companies from developing European countries and Russia, the existence of these relationships in practice is studied. The hypotheses were tested on a sample of about 1 200 Eastern European and Russian companies for the period from 2004 to 2016. It was found that, firstly, state companies pay more dividends. This is due to state's need for cash (budget replenishment), as well as lower cost of debt for state-owned companies. Secondly, companies with high ownership concentration pay less dividends in accordance with agency theory. The majority shareholders derive benefits in form of unpaid dividends from law-unprotected minority shareholders, and monitor managers without using additional instruments such as dividends. In addition, for companies with high level of debt managerial ownership and dividends are substitutes (negative correlation). The influence of foreign owner and cross-listing was not established, since the variable was not significant. The results of this article can be useful for researchers, investors and shareholders, managers and regulators of developing countries.