Effect of profitability and dividend policy on corporate governance and firm value: Evidence from the Indonesian manufacturing Sectors

Abstract

This study aims to analyze the effect of Profitability and Corporate Governance Structure on dividend policy and its impact on the firm value. The population in this research is manufacturing companies listed in Indonesia Stock Exchange as many as 146 companies. The research sample as many as 58 companies, the period of 2013 to 2015. Sampling technique used is purposive sampling. The data analysis technique used is WrapPLS. The results showed that profitability have a negative and significant effect on dividend policy. Profitability has a negative and significant effect on firm value. Profitability is a negative and insignificant effect on firm value as a mediated dividend policy. The structure of corporate governance is positive and significant effect on dividend policy. Corporate governance structure has a positive and significant effect on firm value. Corporate governance structure has a positive and insignificant effect on firm value as a mediated dividend policy. Dividend policy is a positive and insignificant effect on firm value

Diterminants of Dividend Policy: The role of Corporate Governance as Moderating Variable

“…The results of the analysis in model 1 before including the moderating variable Institutional Ownership, the variable that influences the determination of dividend policy is profitability. ROA significantly negatively influences dividend policy with a regression coefficient of -0.350 (p=0.005), meaning that management behavior with the amount of profit earned tends to retain earnings, as an additional source of business capital, and tends not to be distributed as dividends, the results of this research are inconsistent, indicating that company profitability positively influences the determination of dividend policy (Kusuma and Semuel, 2019; Budianto et al, 2022; Salsabillah, 2023) bu consistent with (Tamrin et al, 2017). This means that managers of manufacturing companies in Indonesia tend to apply the pecking order theory, namely raising capital by increasing retained earnings, when the company is still in a state of growth to pursue opportunities to achieve sales and profit targets (Adair and Adaskou, 2015; Li-Ju Chen, 2011).…”

“…Profitability contains elements of effectiveness and efficiency values, in this case effectiveness can be observed based on effectiveness ratios including Total Assets Turnover (TATO), Inventory Turnover (ITO), Account Receivable Turnover (ARTO) and other activity ratios, from the efficiency side it can be seen based on the Gross ratio Profit Margin (GPM), Operating Profit Margin (OPM), and Net Profit Margin (NPM) all of which can indicate the level of efficiency of a company operation (Harmono et al, 2023). Referring to several previous research results, company profitability can influence the determination of dividend policy (Budianto et al, 2022;Tamrin et al, 2017;MYERS, 1984;Kusuma and Semuel, 2019).…”

Dividend Decisions and Economic Value-Added of Firms in Kenya

“…Alternative Dividend Policy: The company may opt to buy back shares to provide shareholders a choice between dividends and fresh shares. This involves buying stock or shares (Tamrin, Mus, & Arfah, 2018). In terms of tax advantages, this is especially beneficial for the shareholder.…”

“…The preservation of shareholder wealth, principally through the augmentation of a company's share price, is usually believed to be a firm's main goal. (Tamrin, Mus, & Arfah, 2018). Three categories of decisions that have the ability to significantly affect a company's value have been identified: dividend, investment, and finance decisions.…”

Peran Kebijakan Dividen Dalam Memediasi Kinerja Keuangan Dan Nilai Perusahaan

“…Profitabilitas sebagai salah satu faktor yang dapat menciptakan nilai perusahaan telah banyak diteliti oleh beberapa peneliti sebelumnya (Gill dan Obradovich, 2012;Hermuningsih, 2014;Sucuahi dan Cambarihan, 2016;Iswajuni et al, 2018). Namun, beberapa peneliti lainnya (Kodongo et al, 2015;Tamrin et al, 2017;Rizki et al, 2018) memberikan hasil yang tidak sama. Hal ini mengindikasikan adanya pengaruh profitabilitas yang tidak konsisten terhadap nilai perusahaan.…”