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The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: evidence from Indonesia

Moin, A; Guney, Y; El Kalak, I

Authors

A Moin

Y Guney

I El Kalak



Abstract

We investigate how a firm's decision to hold excessive cash or to overinvest could influence its dividend payout policy in Indonesia. Additionally, we examine the association between corporate ownership structure and cash dividends. Using a data set of Indonesian listed firms for the period from 1995 to 2014, we find that excessive cash holding (overinvestment) positively (negatively) affects a firm's likelihood of paying dividends. Also, we find that family, foreign, state and institutional ownership have significantly negative links with dividends, which suggests the signals of expropriation of firms' wealth by major shareholders. These findings strongly support the expropriation hypothesis that commonly applies to firms with higher level of concentration or to firms in a weak legal environment by which the rights of minority interests are put at risk by large shareholders.

Citation

Moin, A., Guney, Y., & El Kalak, I. (2020). The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: evidence from Indonesia. Review of Quantitative Finance and Accounting, https://doi.org/10.1007/s11156-019-00862-z

Journal Article Type Article
Acceptance Date Nov 15, 2019
Online Publication Date Dec 5, 2019
Publication Date 2020
Deposit Date Nov 16, 2019
Publicly Available Date Dec 12, 2019
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1007/s11156-019-00862-z
Keywords dividend policy; overcash; overinvestment; corporate governance; ownership structure; Indonesia; JEL Classification: G32, G34, G35
Public URL https://hull-repository.worktribe.com/output/3176516

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