Tying the dividend payout to IFRS profit: does it benefit the shareholders?

Abstract

The primary goal of this research is to identify the benefits arising for the shareholders of the Russian companies in view of the upcoming obligatory transfer of the Russian state-owned companies to paying dividends on the basis of IFRS profit. In order to fulfill the goals of the research the several objectives were formulated: • study the specifics of dividend payment and dividend policies in the Russian market • study Russian and foreign literature on dividend payout and dividend polices as well as literature on the application of International Financial Reporting Standards and their comparison with Russian Accounting Standards, • determine a sample of the Russian companies that have tied their dividend payout to IFRS/US GAAP profit • carry out an empirical research of the data collected for the companies in the sample to test the whether linking the dividend policy and dividend payout to IFRS profit provides benefits for the shareholders of the companies (compared to the shareholders of the companies whose dividends are based on RAS profit) with respect to (i) increased dividend yield, (ii) increased predictability of dividends, (iii) increased stability and regularity of dividend payments. The empirical research showed that the selection of IFRS as the basis for dividend payout does not necessarily lead to increased dividend yield for the shareholders; however, it provides for significantly better dividend predictability which is an important factor for the shareholders.