The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: evidence from Indonesia

Abstract

We investigate how a firm's decision to hold excessive cash or to overinvest could influence its dividend payout policy in Indonesia. Additionally, we examine the association between corporate ownership structure and cash dividends. Using a data set of Indonesian listed firms for the period from 1995 to 2014, we find that excessive cash holding (overinvestment) positively (negatively) affects a firm's likelihood of paying dividends. Also, we find that family, foreign, state and institutional ownership have significantly negative links with dividends, which suggests the signals of expropriation of firms' wealth by major shareholders. These findings strongly support the expropriation hypothesis that commonly applies to firms with higher level of concentration or to firms in a weak legal environment by which the rights of minority interests are put at risk by large shareholders.

Do Family and Institutional Ownerships Influence the Corporate Dividend Policy?

“…5% or more share ownership by institutional company means that those institutional companies are the majority share owner (Bhojraj & Sengupta, 2003;Lin & Fu, 2017). Moreover, Moin et al (2019) showed that during the year of 1995-2014, the average percentage of institutional ownerships in Indonesia is relatively low. The smallest share ownership by institutional company is 0.37% and the largest one is 13%.…”

Pengaruh Free Cash Flow, Ownership Structure, Growth Opportunity Terhadap Kebijakan Dividen

“…Pada tingkat kepemilikan manajerial yang tinggi, manajer cenderung mengalokasikan laba untuk ditahan dibandingkan membayar dividen dengan alasan sumber dana internal lebih efisien dibandingkan sumber dana eksternal dalam pertumbuhan perusahaan. Penelitian yang dilakukan oleh Moin et al (2019) menunjukkan bahwa kepemilikan manajerial berpengaruh positif terhadap kecenderungan membayar dividen. Ditemukan inkonsistensi hasil penelitian yang diperoleh dari penelitian (Sari & Budiasih, 2016) yang menunjukkan bahwa kepemilikan manajerial berpengaruh negatif signifikan pada kebijakan dividen.…”

“…Penelitian oleh Cheng et al (2018), Sindhu et al (2016), Jabeen dan Ahmad (2019) menemukan bahwa semakin stabil kepemilikan institusional, maka jumlah dividen yang dibagikan akan semakin besar pula. Ditemukan inkonsistensi hasil penelitian yang diperoleh dari penelitian Sari & Budiasih (2016), Al-Najjar & Kilincarslan (2016), Rajput & Jhunjhunwala (2019), dan Moin et al (2019) yang menunjukkan bahwa kepemilikan institusional menunjukkan berpengaruh negatif terhadap kebijakan dividen.…”

“…Berdasarkan penelitian yang dilakukan oleh Moin et al (2019) didapatkan hasil bahwa semakin besar persentase saham yang dimiliki pihak manajer, maka dividen yang dibagikan juga akan semakin besar. Hasil serupa juga ditemukan dalam penelitian yang dilakukan oleh Jayanti & Puspitasari (2017), Mardani et al…”

The Corporate Governance Implementation on Related Party Transactions in Indonesia

“…Besides, good corporate governance could improve the company's value. Moin et al, (2019) added that corporate governance helps to measure a conflict of interest between controlling and minority shareholders through monitoring the manager.…”