Citation:

Salsa Dhira Ananta, Yusuf Arya Musthofa, Farah Margaretha Leon. "Factors Affecting Dividend Policy in Indonesian Companies" International Research Journal of Economics and Management Studies, Vol. 2, No. 2, pp. 364-374, 2023.

Abstract:

One of the most crucial choices in corporate financial management is dividend policy. The corporation decides how much of the earnings will be allocated to shareholders and how much will be retained and used for investment and development. The study's goal was to examine the impact of policy factors. Profitability, company size, debt, liquidity, free cash flow, institutional ownership shares, and earnings per share are the independent factors in this study. Dividend policy is the dependent variable. In order to perform this study, data from 26 Indonesian firms listed on the LQ45 Index exchange were gathered over a period of 4 years (2018-2021), with testing done using a panel data regression model. According to the research's findings, corporate earnings, corporate debt, liquidity, institutional ownership shares, and net income per share have no appreciable impact on a company's dividend policy. While the dividend policy of firms featured on the LQ45 Index market is significantly negatively impacted by company size and free cash flow. This demonstrates that growing dividend distribution can be based on a company's size as a standard. Additionally, a company's propensity to pay dividends decreases as cash flow increases. This is so that businesses can continue to operate with strong liquidity and better financial flexibility. The conclusion of the research is that it gives guidance for financial managers to select the best dividend payout policy and enhance decision transparency. For investors, investors should choose to invest in companies with large company size and high cash flow because this can affect dividend payment policies which will also have an impact on the amount of dividends the company will distribute.

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Keywords:

Dividend Policy, Earnings Per Share, Financial Leverage, Firm’s Liquidity, Firm Size, Free Cash Flow, Institutional Ownership, Profitability.