Purpose This research aims to examine the effect of ownership structure on dividend policy using the Indonesian context. The most common ownership structure is concentrated in the hand of family owners except in the UK and USA (La Porta et al., 1998, 2000). Family owners hold more than half of the companies in Indonesia (Carney & Child, 2013; Claessens et al., 2000). Family firms play an important role in Indonesia. Another important characteristic that emerges is the rise of government- and foreign-controlled firms in Indonesia. Thus, this research also divides ownership concentration into family firms, government-controlled and foreign-controlled firms. Design/methodology/approach Samples of this research consist of dividend announcements during 2006-2012 in Indonesian Stock Exchange. This research excluded financial data because these have characteristics that are different non-financial sectors’ characteristics. The final sample of this research consists of a 710 firm-year observation. Findings The result of this research shows that ownerships have a positive effect on dividend payout. This research divides the sample into family-controlled firms, government-controlled firms (GOEs) and foreign-controlled firms. This research shows that government- and foreign-controlled firms have a positive impact on dividend payout. However, family firms have a negative effect on the dividend payout. Family firms pay lower dividends because they prefer to control it themselves. Family firms earn benefit from those resources, but at the expense of minority shareholders. Thus, family firms engage in expropriation to minority shareholders. Research limitations/implications This study focuses on ownership structure of Indonesian listed firm. This study does not analyze the impact of other corporate governance mechanism such as board structure on dividend decisions. The owner of the companies (family, government and foreign firm) has an opportunity to put their member as part of board members. However, this study does not analyze the impact of board structure on dividend decisions. Originality/value This study provides evidence that ownership concentration positively affects dividend payout. However, there is a different effect of ownership structure (family-controlled firms, GOEs and foreign-controlled firm). Government- and foreign-controlled have a positive effect; however, family-controlled firm have a negative effect on dividend payout. Therefore, this study provides evidence of the importance of ownership structure on dividend decision.
This paper investigates the impact of banks' political connections on their ability to collect deposits under two different deposit insurance regimes (blanket guarantee and limited guarantee). We estimate a simultaneous equations model of supply and demand for funds using quarterly data for Indonesian banks from 2002 to 2008. We find that, regardless of their type (state-owned or private entities), politically connected banks are able to attract deposits more easily than their non-connected counterparts. We also show that this effect is more pronounced after the implementation of formal deposit insurance with limited coverage. Our findings have various policy implications. Formal deposit insurance might have improved market discipline, as highlighted by earlier studies, but it has also exacerbated the issue of political connections in the banking sector. Political connections, bank deposits, and formal deposit insurance:Evidence from an emerging economy Abstract This paper investigates the impact of banks' political connections on their ability to collect deposits under two different deposit insurance regimes (blanket guarantee and limited guarantee). We estimate a simultaneous equations model of supply and demand for funds using quarterly data for Indonesian banks from 2002 to 2008. We find that, regardless of their type (state-owned or private entities), politically connected banks are able to attract deposits more easily than their non-connected counterparts. We also show that this effect is more pronounced after the implementation of formal deposit insurance with limited coverage. Our findings have various policy implications. Formal deposit insurance might have improved market discipline, as highlighted by earlier studies, but it has also exacerbated the issue of political connections in the banking sector.JEL Classification: G28, D72
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