Abstract
The purpose of this study is to examine and analyze the direct and indirect effects of the variable ownership structure, board composition, dividend policy, and financial performance and stock returns in the manufacturing industry on the Indonesia Stock Exchange. The population of this research is manufacturing industrial companies on the IDX since 2015 and was still active until 2019. The sample obtained is 92 issuers who continuously distribute dividends. Testing the research hypothesis, using the structural equation model (SEM) with the Partial Least Square (PLS) software approach. The results show that the ownership structure significantly affected the composition of the board of directors and dividend policy. Ownership structure has no significant effect on stock returns and financial performance. The composition of the board of directors has a significant effect on dividend policy and financial performance but has no significant effect on stock returns. Dividend policy has a significant effect on financial performance but has no significant effect on stock returns. Financial performance has no significant effect on stock returns.
Highlights
In public companies in Indonesia, there is no clear separation between ownership and control (Claessens et al 2000)
The composition of the board of directors has a significant effect on dividend policy and financial performance but has no significant effect on stock returns
The measurement results show the t-statistic value of 16.72> 1.96 (5% significance level) with the original sample value of 0.80, so the first hypothesis in this study is accepted. These data indicate that the sample data on the ownership structure variable is successful in showing evidence of its relationship with the variable composition of the board of directors. This means that if there is an increase in the quality of the ownership structure, there will be an increase in the quality of the composition of the board of directors, this effect has a high significance
Summary
In public companies in Indonesia, there is no clear separation between ownership and control (Claessens et al 2000). Most of the company's ownership structure is still concentrated by the family, and the managerial position is held by the majority shareholder or their family, as a result, what is the opinion of the largest shareholder is the opinion of the manager. Implementation of corporate governance in companies in Indonesia is more focused on agency conflicts between majority and minority shareholders. La Porta et al (2000) defines corporate governance as a set of mechanisms used by outside investors to protect themselves against expropriation by insiders. In a country with weak investor protection, control is concentrated on a few large investors. In this situation, dividends are considered as an efficient mechanism to overcome the problem of expropriation. Besides influencing dividend policy and the size of the board of directors, the structure of majority and minority shareholdings may affect company performance and company stock returns
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