Abstract
ABSTRACT This study aims to determine the mutual influence between capital structure and dividend policy in Indonesia with a study period of 2010 to 2012. Using the method of two-stage least squares with factors of capital structure and dividend payout ratio as an endogenous variable, while institutional ownership, tangibility, growth opportunity, liquidity, profitability, business risk, firm size, dan free cash flow as an exogenous variable in the study. This research uses populations of all non-financial companies listed on the Indonesian Stock Exchange during the three consecutive years of cash dividends. It is known that the samples of this study are fifty companies. Result from this study is there is no mutual influence between capital structure and dividend policy. In addition, factors that significantly influence the capital structure are institutional ownership liquidity, firm size and free cash flow while the factors that significantly influence the dividend policy are tangibility and firm size. Keywords: capital structure, dividend policy, dividend payout ratio, institutional ownership, tangible asset, growth opportunity, liquidity, profitability, business risk, firm size, and free cash flow.
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