The Association of Managerial Ownership with Dividend Policy and Leverage Policy: Indonesian Firms

Abstract

The research examines the relationship of financial policy (dividend and leverage) influenced managerial ownership. Managerial ownership as dependent variable regressed with dividend and leverage policy that already separate the effect of agents and insiders wealth. Logit Model is use to examine the relationship because managerial ownership proxy by dummy variable. Hosmer-Lemeshow and Andrews Goodness-Of-Fit test used to conclude the model fitted. Result showed a significant relationship that financial policy influenced probability firm engages in managerial ownership program. Dividend policy is a substitute for managerial ownership. The lower dividend level will increase the probability of the firm engage in managerial ownership program and still maintain the effectiveness of reducing agency cost of equity. The lower leverage level will increase the probability of the firm engage in managerial ownership program to multiply the effect of reduced agency cost of debt with the reduction in agency cost of equity.

Keywords: Managerial, ownership, leverage, dividend, logit

JEL Classification: G35, G32, G12, G15, J33