Murhadi, Werner-Ria (2008): Study On Dividend Policy in Indonesian Capital Market. Published in: Jurnal Manajemen & Kewirausahaan , Vol. March, No. No. 1 (9. March 2008): pp. 1-29.
This is the latest version of this item.
Download (347kB) | Preview
This research aims to test dividend signaling theory in an Indonesian capital market. Signaling theory states that dividend policy has information content that can influence to share price. Examination of theory of signaling is related to research phenomena in other countries indicating that by percentage there is degradation of company which is pay dividend and there even exist mentioning this as phenomenon of disappearing dividend. Examination of theory of signaling is also related to the research result showing the existence or inexistence of the influence of dividend policy to share price. Besides, in this research is also conducted by examination of agency theory. This research of agency theory tests the influence of: (1) Free Cash Flow to share price, (2) Structure of Ownership to share price, and (3) Structure of ownership to dividend policy. This research also tests life cycle theory, seen influence of cycle of company life to dividend policy. Companies which enter in growth phase tend not to pay a lot of dividend, compared to company at matured step. This research use quantitative approach by using method of path analysis. This research use samples in the form of company allocating dividend for period 1995-2005 which listed on PT Jakarta Stock Exchange. Final samples which are utilized in this research are equal to 1052 year observation. This research also tests sensitivity, widened time of even from 1 day at especial model, becoming 5 and 10 day. Besides test of sensitivity is also conducted changed approach of market model become mean adjusted model in determining expected return. Research finding indicates that signaling theory still relevant in influencing movement of share price. Besides, research finding also supports agency theory told by Jensen in seeing influence of free cash flow to share price. For the influence of structure of ownership to share price, the result supports entrenchment argument. While influence of structure of ownership to dividend policy found by result which do not support agency theory. Life Cycle theory in this research is obtained by result which is research confirmation before all, where there are influence of cycle step of company life to dividend policy.
|Item Type:||MPRA Paper|
|Original Title:||Study On Dividend Policy in Indonesian Capital Market|
|Keywords:||Dividend, Investment opportunity set, Ownership structure, Free Cash Flow, Signaling theory, agency theory, life cycle theory|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G3 - Corporate Finance and Governance > G35 - Payout Policy
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
|Depositing User:||werner murhadi|
|Date Deposited:||19. Jan 2012 08:28|
|Last Modified:||13. Feb 2013 07:16|
Adaoglu, C., 2000, Instability in Dividend Policy of the Istanbul Stock Exchange Corporation: Evidence from Emerging Market, Emerging Market Review, Vol.1:252-270.
Aharony, J., H. Falk, and N. Yehuda, 2003, Corporate Life Cycle and the Value–Relevance of Cash Flow versus Accrual Financial Information, Working Paper, Tel Aviv University.
Aharony, J., and I. Swary, 1980, Quarterly Dividend and Earning Announcements and Stockholders Returns: An Empirical Analysis, Journal of Finance, Vol.35,:1-12.
Allen, F., and R. Michaely, 2002, Payout Policy, Working Paper, Code:01-21B, The Wharton Financial Institution Center.
Amihud, Y., and K. Li, 2002, The Declining Information Content of Dividend Announcement and the Effect of Institutional Holding, Working Paper, Stern School of Business, New York University.
Anthony, J. H., and K. Ramesh, 1992, Association between Accounting Performance Measure and Stock Prices: a Test of the Life Cycle Hypothesis, Journal of Accounting and Economics, Vol.15:203-227.
Asiedu, S., 2005, Essay in Dividends – Canadian Experience, Working Paper, Eric Sprott School of Business, Carleton University.
Bajaj, M., and A.M. Vijh, 1990, Dividend Clienteles and the Information Content of Dividend Change, Journal of Financial Economics, Vol.26:193-219.
Baker, M.P., and J. Wurgler, 2002, Why are Dividend Disappearing? An Empirical Analysis, Working Paper, Code Harvard NOM research paper no.03-12, Harvard Business School.
Black, F., 1976, The Dividend Puzzle, Journal of Portfolio Management, Winter, Vol.2:72-77.
Brav, A., J.R. Graham, C.R. Harvey and Michaely, 2005, Payout Policy in the 21st Century, Journal of Financial Economics, Vol.77:483-527.
Brickley, James A., 1983, Shareholder Wealth, Information Signaling and The Specially Designated Dividend, Journal of Financial Economics, Vol.12:187-209.
Chen, S.S., K.W. Ho, C.F. Lee and G.H.H. Yeo, 2000, Investment Opportunity, Free Cash Flow and Market Reaction to International Joint Venture, Journal of Banking and Finance, Vol.24:1747-1765.
Clay, D.G., 2002, Institutional Ownership and Firm Value, Working Paper, Marshall School of Business, University of Southern California.
DeAngelo, H., L. DeAngelo and D.J. Skinner, 2002, Are Dividend Disappearing? Dividend Concentration and the Consolidation of Earning, Working Paper, Code No. 02-9, USC Finance and Business Economics, USC Marshall School of Business.
DeAngelo, H., L. DeAngelo and R.M. Stulz, 2006, Dividend Policy and the Earned Contributed Capital Mix: a Test of Life Cycle Theory, Journal of Financial Economics, Vol.81:227-254.
Easterbrook, F.H., 1984, Two Agency Cost Explanation of Dividends, American Economic Review, Vol.74,:650-659.
Fama, E.F., and H. Babiak, 1968, Dividend Policy: An Empirical Analysis, Journal of The American Statistical Association, Vol.63,:1132-1161.
Fama, E.F., and K.R. French, 2001, Disappearing Dividend: Changing Firm Characteristics or Lower Propensity to Pay?, Journal of Financial Economics, Vol.60:3-43.
Gaver, J.J., and K.M. Gaver, 1993, Additional Evidence on the Association between the Investment Opportunity Set and Corporate Financing, Dividend and Compensation Policies, Journal of Accounting and Economics, Vol.16:125-160.
Grinstein, Y., and R. Michaely, 2003, Institutional Holding and Payout Policy, Working Paper, Cornell University.
Grullon, G., R. Michaely, and B. Swaminathan, 2002, Are Dividend Changes a sign of firm maturity?, Journal of Business, Vol.75:387-424.
Gugler, K., 2003, Corporate Governance, Dividend Payout Policy, and the Interrelation between Dividend, R&D, and Capital Investment, Journal of Banking and Finance, Vol.27:1297-1321.
Gul, F.A., 1999a, Government Share Ownership, Investment Opportunity Set and Corporate Policy Choices in China, Pacific Basin Finance Journal, Vol.7:157-172.
Gul, F.A., 1999b, Growth Opportunities, Capital Structure and Dividend Policies in Japan, Journal of Corporate Finance, Vol.5:141-168.
Hair, et al, 2006, Multivariate Data Analysis, Sixth Edition, Pearson Prentice Hall.
Han, K.C., S.H. Lee, and D.Y. Suk, 1999, Institutional Shareholders and Dividends, Journal of Financial and Strategic Decision, Spring, Vol.12:53-62.
Ho, S.S.M., K.C.K. Lam, and H. Sami, 2004, The Investment Opportunity Set, Director Ownership, and Corporate Policy: Evidence from Emerging Market, Journal of Corporate Finance, Vol.10:383-408.
Howe, K. M., J. He and G.W. Kao, 1992, One Time Cash Flow Announcement and Free Cash Flow Theory: Share Repurchase and Special Dividends, Journal of Finance, Vol.47:1963-1975.
Jennings, W.W., 2002, Further Evidence on Institutional Ownership and Corporate Value, Working Paper, US Air Force Academy. Jensen, M.C., 1986, Agency cost of free cash flow, corporate finance and takeover, American Economic Review, Vol.76:323-329.
Jensen, M.C., and C. W. Smith, 1984, The Modern Theory of Corporate Finance, McGraw Hill.
Jensen, M.C., and W. H. Meckling, 1976, Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure, Journal of Financial Economics, Vol.3:305-360.
Kaestner, R., and F. Y. Liu, 1998, New Evidence on The Information Content of Dividend Announcement, The Quarterly Review of Economics and Finance, Vol.38,:251-274.
Kallapur, S., 1993, Dividend Payout Ratios as Determinants of Earning Response Coefficient, Journal of Accounting and Economics, Vol.17:359-375.
Lang, L. H. P., and R. H. Litzenberger, 1989, Dividend Announcement : Cash Flow Signalling VS Free Cash Flow Hypothesis, Journal of Financial Economics, Vol.24:181-191.
Lang, L. H. P., and R.M. Stulz, and R.A. Walkling, 1991, A Test of Free Cash Flow Hypothesis: The Case of Bidder Return, Journal of Financial Economics, Vol.29:315-335.
Laporta, R., F. Lopez de Silanes, A. Shleifer and R.W. Vishny, 1999, Agency Problems and Dividends Policies around the World, Working Paper, Harvard University.
Linn, S.C., and D. Park, 2005, Outside Director Compensation Policy and the Investment Opportunity Set, Journal of Corporate Finance, Vol.11:680-715.
Lintner, J., 1956, Distribution of Incomes of Corporation among Dividends, Retained Earnings, and Taxes, The American Economic Review, Vol.46,:97-113.
McCabe, G.M., and K.C.Yook, 1997, Jensen, Myers-Majluf, Free Cash Flow and The Return to Bidder, The Quarterly Review of Economics and Finance, Vol.37,[3,fall]:697-707.
Megginson, W.L., 1997, Corporate Finance Theory, Addison Wesley.
Michaely, R., and M.R. Roberts, 2006, Free Cash Flow, Signaling, and Smoothing: Lesson from Dividend Policy of Public and Private Firms, Working Paper, Cornell University.
Miller, M.H., and F. Modigliani, 1961, Dividend Policy, Growth and the Valuation of Share, Journal of Business, Vol.34:411-433.
Morck, R., A. Shleifer and R.W. Vishny, 1988, Management Ownership and Market Valuation: an Empirical Analysis, Journal of Financial Economics, Vol.20:293-315.
Myers, S.C., and N.S. Majluf, 1984, Corporate Financing and Investment Decision when Firms have Information that Investor Do Not Have, Journal of Financial Economics, Vol.13:187-221.
Myers, S.C, 1977, Determinant of Corporate Borrowing, Journal of Financial economics, Vol.5:147-175.
Naccur, Sammy Ben, and Mohamed Goaied, 1999, The Value Creation Process in the Tunisian Stock Exchange, Proceeding API/WPS 9903, Universite de Tunis IH, Faculte des Sciences Economiques et de Gestion, Tunisia.
Neuman, W.L., 2003, Social Research Methods: Qualitative and Quantitative Approaches, Fifth Edition, Allyn and Bacon.
Ovtcharova, G., 2003, Institutional Ownership and Long Term Stock Returns, Working Paper, The University of Chicago.
Pettit, R. Richardson, 1972, Dividend Announcement, Security Performance and Capital Market Efficiency, Journal of Finance, vol.27(5):993-1007.
Senchack, A.J., and W.Y. Lee, 1980, Comparative Dynamics in a Life Cycle Theory of the Firm, Journal of Business Research, p.159-185.
Shleifer, A., and R.W. Vishny, 1986, Large Shareholder and Corporate Control, Journal of Financial Research, Vol.5, [fall]:249-259.
Short, H., H. Zhang and K. Keasey, 2002, The Link between Dividend Policy and Institutional Ownership, Journal of Corporate Finance, Vol.8:105-122.
Skinner, D.J., 2004, What do Dividends Tell Us About Earning Quality?, Working Paper, University of Chicago Graduate School of Business.
Smith, C.W., and R.L. Watts, 1992, The Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies, Journal of Financial Economics, Vol.32:263-292.
Sudarma, M., 2004, Pengaruh Struktur Kepemilikan Saham, Faktor Intern and Faktor Esktern terhadap Struktur Modal and Nilai Perusahaan [Studi pada Industri yang Go-Public di Bursa Efek Jakarta], Disertasi, Universitas Brawijaya.
Thomsen, S., 2004, Blockholder Ownership, Dividend and Firm Value on Continental Europe, Working Paper, Andish Social Science Research Council.
Yudianti, F.N., 2005, Analisis Pengaruh Set Kesempatan Investasi, Manajemen Laba, Leverage and Dividen terhadap Hubungan antara Aliran Kas Bebas and Nilai Pemegang Saham, Disertasi, Universitas Gadjah Mada.
Available Versions of this Item
Study On Dividend Policy: Antecedent and Its Impact On Share Price. (deposited 12. Oct 2010 19:19)
- Study On Dividend Policy in Indonesian Capital Market. (deposited 19. Jan 2012 08:28) [Currently Displayed]