RE-EXAMINING DIVIDEND PAYOUT, PROPORTION OF OWNERSHIP AND FIRM’S VALUE IN INDONESIA

Abstract

We re-examining the impact of dividend policy and proportion of ownership on firm value in the Indonesian Capital Market, which include 2712 firm-year over the period of 2005-2016. Tobin Q measures firm value, dividend payout over net income is a measure of dividend policy, and meanwhile we also include proportion ownership of insider of company, foreign owner and government owner. Panel data regression model is used in our analysis. After controlling with firm specific variables; size of company, liquidity, profitability and leverage, we find that dividend policy is irrelevant in driving the value of firm in Indonesian capital market. This phenomenon might occur in Indonesia because market is characterized by short-term investment prospective from investors. They are less concern on dividend payment, more focus on capital gains. Additionally, it seems that insiders expropriate the firm cash flows for their benefits on the cost of minority shareholders with their control power, consequently value lower by the market. However, the higher the ownership by foreigner impact value higher by the market, positive reaction emerge possibly because the firm perceive applying good corporate governance. Concentrated ownership on government does not have significant relationship with the value of firm.