The Moderating Effect of Dividend Policy on Free Cash Flow and Profitability Towards Firm Value

G.A Sri Oktaryani,Siti Sofiyah Abdul Mannan

doi:10.29303/jmm.v7i3.311

Abstract

This study is aimed to determine the moderating effect of Dividend Policy on Free Cash Flow and Profitability towards Firm Value. This study use Moderate Regression Analysis (MRA) as tool to analyze the moderating effect of Dividend Policy on the sample tested. Sample are chosen by using purposive sampling method from all manufacture firms that listed on Indonesian Stock Exchange throughout 2010-2015 which offered cash dividend to their shareholders. By using panel data, the findings show that Free Cash Flow and Profitability themselves have significant effect on Firm Value. But conversely, each Free Cash Flow and Profitability does not have significant effect on Firm Value after being moderated by Dividend Policy. It is because the direct effect of Free Cash Flow and Profitability toward Firm value is bigger than the indirect effect. The results indicate that Dividend Policy is just predictor moderation in this case.Dividend Policy, Free Cash Flow, Profitability, Firm Value, Manufacture, MRA

Highlights

The main purpose of the establishment of the company is how to provide prosperity for the company's stakeholders
Some factors that can provide positive signals in the improvement of firm value include corporate profitability, free cash flow, and dividends provided by the company
This study examines whether Free Cash Flow and Profitability could influence Firm Value and in case this model can be moderated by Dividend Policy

Summary

Introduction

The main purpose of the establishment of the company is how to provide prosperity for the company's stakeholders. For companies that have been registered in the capital market, this effort can be done by increasing the value of the firm through increasing stock prices. The higher the stock price the value of the firm will increase. The increased firm value indirectly signals the investors that the firm's performance is predicted to be better in the Jurnal Magister Manajemen Unram Vol 7, No 3. September 2018 future so it can encourage them to invest more in the company. Some factors that can provide positive signals in the improvement of firm value include corporate profitability, free cash flow, and dividends provided by the company

Objectives

Methods

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Conclusion