Dividends, Leverage, and Family Ownership in the Emerging Indonesian Market
14 Pages Posted: 23 Apr 2016
Date Written: March 25, 2016
We examine the roles of dividends and leverage to mitigate agency problems within family firms in Indonesia. Using simultaneous equations, we find a significant negative association between family ownership and dividend payout and a two-way negative relation between dividend payout and leverage. Our analysis reveals that, compared to non-family firms, family firms tend to maintain a lower dividend pay-out and higher leverage. The presence of large non-family ownership appears to have an impact on determining levels of private benefit control. During the Asian and global financial crisis, family firms changed their dividend pay-out more than non-family firms did.
Keywords: dividend, leverage, family ownership
JEL Classification: G35, G32
Suggested Citation: Suggested Citation