The Effects of Ownership Structure, Sub-Optimal Cash Holdings and Investment Inefficiency on Dividend Policy: Evidence From Indonesia

Moin, A., Guney, Y. and El Kalak, I., the Effects of Ownership Structure, Sub-Optimal Cash Holdings and Investment Inefficiency on Dividend Policy: Evidence From Indonesia, Review of Quantitative Finance and Accounting, Forthcoming

45 Pages Posted: 2 Dec 2019

See all articles by Abdul Moin

Abdul Moin

Universitas Islam Indonesia, Faculty of Economics, Students

Yilmaz Guney

University of Hull

Izidin El Kalak

Cardiff Business School

Date Written: November 16, 2019

Abstract

We investigate how a firm’s decision to hold excessive cash or to over-invest 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 (over-investment) 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.

Keywords: Dividend Policy, Over-cash, Over-investment, Corporate Governance, Ownership Structure, Indonesia

JEL Classification: G32, G34, G35

Suggested Citation

Moin, Abdul and Guney, Yilmaz and El Kalak, Izidin, The Effects of Ownership Structure, Sub-Optimal Cash Holdings and Investment Inefficiency on Dividend Policy: Evidence From Indonesia (November 16, 2019). Moin, A., Guney, Y. and El Kalak, I., the Effects of Ownership Structure, Sub-Optimal Cash Holdings and Investment Inefficiency on Dividend Policy: Evidence From Indonesia, Review of Quantitative Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3488453

Abdul Moin

Universitas Islam Indonesia, Faculty of Economics, Students ( email )

Jl. Pawiro Kuat
Condong Catur, Depok
Sleman, Daerah Istimewa Yogyakarta 55283
Indonesia

Yilmaz Guney (Contact Author)

University of Hull ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://https://www.hull.ac.uk/faculties/fblp/hubs.aspx

Izidin El Kalak

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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