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
Date Written: November 16, 2019
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: Suggested Citation