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Revealing the Relationships between Debt Financing Policy and Payout Policy of Companies in BRICS Countries

ФИО студента: Ekaterina Kovaleva

Руководитель: Elena Rogova

Кампус/факультет: St.Petersburg School of Economics and Management

Программа: Finance (Master)

Год защиты: 2021

This study is devoted to the analysis of the two-way relationship between payouts to shareholders and the debt financing policy of companies in emerging markets. At the first stage, the analysis of the key aspects and theories of the companies' dividend policy was carried out. Further, the main determinants that influence the decision of managers on the payment policy and the attraction of debt financing were identified. The research hypotheses were supported by key results of studies analyzing the relationship between the dividend policy and the willingness of companies to attract external financing. The study was conducted based on a sample of 200 companies from the BRICS countries in the period from 2005 to 2019 using regression analysis. According to the empirical analysis, a positive two-way relationship was found between the policies of dividend payments and debt financing. Thus, companies from developing countries are in the growth stages and have a high level of investments. Therefore, they can use external financing to maintain payments or expand the business. These two instruments can also be considered simultaneously as complementary solutions to the agency problem. In addition, the paper also confirmed the hypothesis that companies try to adhere to the policy of smoothing dividends to avoid negative signals to the market about their financial condition. The research paper also submits an analysis of possible cross-country differences regarding the studied dependence for the developing BRICS countries.

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