IDEAS home Printed from https://ideas.repec.org/a/ers/ijebaa/vivy2016i2p29-40.html
   My bibliography  Save this article

The Motives behind Dividend Policy

Author

Listed:
  • Winston Pontoh

Abstract

The puzzle for dividend policy in Indonesia is still remain since the firms have uncertain distribution for dividends to their shareholders. The objectives of this study are testing the free cash flow theory, life cycle theory, and catering theory with 139 firms as samples which is listed in Indonesia Stock Exchange for period of 2010 to 2015. This study finds that, firms in Indonesia are not at mature level and there is an existence for free cash flow effect on dividend payers with lower debt only, while catering effect is generally exist for firms as dividend payers. Furthermore, since the firms as non dividend payers are on growth level then they are generally use their profit and capital gain includes debts in purposes of investment activities. Keywords : dividend policy, free cash flow, life cycle, catering

Suggested Citation

  • Winston Pontoh, 2016. "The Motives behind Dividend Policy," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 29-40.
    • Handle: RePEc:ers:ijebaa:v:iv:y:2016:i:2:p:29-40
    as

    Download full text from publisher

    File URL: http://www.ijeba.com/documents/papers/2-PONTOH.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eleftherios Thalassinos & Erginbay Ugurlu & Yusuf Muratoglu, 2012. "Income Inequality and Inflation in the EU," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 127-140.
    2. Kuan, Tsung-Han & Li, Chu-Shiu & Liu, Chwen-Chi, 2012. "Corporate governance and cash holdings: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 303-314.
    3. Winston PONTOH, 2015. "Signaling, Bird In The Hand And Catering Effect In Indonesia," JOURNAL OF LIFE ECONOMICS, Holistence Publications, vol. 2(3), pages 1-24, July.
    4. repec:jle:journl:130 is not listed on IDEAS
    5. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    6. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    7. Konstantinos Liapis & Antonios Rovolis & Christos Galanos & Eleftherios Thalassinos, 2013. "The Clusters of Economic Similarities between EU Countries: A View Under Recent Financial and Debt Crisis," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 41-66.
    8. Eleftherios I. Thalassinos & Erginbay Ugurlu & Yusuf Muratoglu, 2015. "Comparison of Forecasting Volatility in the Czech Republic Stock Market," Applied Economics and Finance, Redfame publishing, vol. 2(1), pages 11-18, February.
    9. repec:bla:jfinan:v:59:y:2004:i:3:p:1125-1165 is not listed on IDEAS
    10. Kai Li & Xinlei Zhao, 2008. "Asymmetric Information and Dividend Policy," Financial Management, Financial Management Association International, vol. 37(4), pages 673-694, December.
    11. Weijermars, Ruud, 2012. "Regulatory reform options to revitalize the US natural gas value chain," Utilities Policy, Elsevier, vol. 21(C), pages 50-58.
    12. Li, Wei & Lie, Erik, 2006. "Dividend changes and catering incentives," Journal of Financial Economics, Elsevier, vol. 80(2), pages 293-308, May.
    13. Baker, Malcolm & Wurgler, Jeffrey, 2004. "Appearing and disappearing dividends: The link to catering incentives," Journal of Financial Economics, Elsevier, vol. 73(2), pages 271-288, August.
    14. Fairchild, Richard & Guney, Yilmaz & Thanatawee, Yordying, 2014. "Corporate dividend policy in Thailand: Theory and evidence," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 129-151.
    15. Gustavo Grullon & Roni Michaely & Bhaskaran Swaminathan, 2002. "Are Dividend Changes a Sign of Firm Maturity?," The Journal of Business, University of Chicago Press, vol. 75(3), pages 387-424, July.
    16. Thakor, Anjan V. & Furlong Wilson, Patricia, 1995. "Capital requirements, loan renegotiation and the borrower's choice of financing source," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 693-711, June.
    17. repec:jle:journl:160 is not listed on IDEAS
    18. DeAngelo, Harry & DeAngelo, Linda & Stulz, Rene M., 2006. "Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory," Journal of Financial Economics, Elsevier, vol. 81(2), pages 227-254, August.
    19. Bonaimé, Alice Adams & Öztekin, Özde & Warr, Richard S., 2014. "Capital structure, equity mispricing, and stock repurchases," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 182-200.
    20. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
    21. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-659, September.
    22. Aivazian, Varouj A. & Ge, Ying & Qiu, Jiaping, 2005. "The impact of leverage on firm investment: Canadian evidence," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 277-291, March.
    23. repec:jle:journl:170 is not listed on IDEAS
    24. Neale, Bill & Milsom, Tony & Hills, Carl & Sharples, Jane, 1998. "The hostile takeover process:: A case study of Granada versus Forte," European Management Journal, Elsevier, vol. 16(2), pages 230-241, April.
    25. Christopher Polk & Paola Sapienza, 2009. "The Stock Market and Corporate Investment: A Test of Catering Theory," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 187-217, January.
    26. David Paul Elia SAERANG & Winston PONTOH, 2016. "The Role Of Ownership On Behavior Of Dividend Payers," JOURNAL OF LIFE ECONOMICS, Holistence Publications, vol. 3(4), pages 59-68, October.
    27. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter.
    28. Jordan, Bradford D. & Liu, Mark H. & Wu, Qun, 2014. "Corporate payout policy in dual-class firms," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 1-19.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:jle:journl:170 is not listed on IDEAS
    2. Novi Swandari Budiarso, 2019. "Agent, Steward, and Dividend Policy," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 83-94.
    3. repec:jle:journl:160 is not listed on IDEAS
    4. repec:jle:journl:161 is not listed on IDEAS
    5. repec:jle:journl:201 is not listed on IDEAS
    6. ElBannan, Mona A., 2020. "Does catering behavior persist? Evidence on dividend sentiment in emerging financial markets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 350-373.
    7. Maria Elisabete Duante Neves, 2017. "Payout and Firm's Catering," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 104-132.
    8. Thaer Alhalabi & Vítor Castro & Justine Wood, 2023. "Bank dividend payout policy and debt seniority: Evidence from US Banks," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 32(5), pages 285-340, December.
    9. repec:ers:journl:v:v:y:2017:i:4:p:104-132 is not listed on IDEAS
    10. Liu, Chinpiao & Chen, An-Sing, 2015. "Do firms use dividend changes to signal future profitability? A simultaneous equation analysis," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 194-207.
    11. Hu, May & Tuilautala, Mataiasi & Kang, Yuni, 2019. "Bandwagon effect: Special dividend payments," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 339-363.
    12. du Jardin, Philippe & Séverin, Eric, 2011. "Dividend policy," MPRA Paper 44382, University Library of Munich, Germany.
    13. Booth, Laurence & Zhou, Jun, 2017. "Dividend policy: A selective review of results from around the world," Global Finance Journal, Elsevier, vol. 34(C), pages 1-15.
    14. Nicolas Aubert, 2016. "Does the Catering Theory of Dividend Apply to the French Listed Firms?," Bankers, Markets & Investors, ESKA Publishing, issue 145, pages 27-38, November-.
    15. Byun, Jinho & Kim, Kihun & Liao, Rose C. & Pan, Carrie, 2021. "The Impact of Investor Sentiment on Catering Incentives around the World," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 71(C).
    16. Jiang, Zhan & Kim, Kenneth A. & Lie, Erik & Yang, Sean, 2013. "Share repurchases, catering, and dividend substitution," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 36-50.
    17. Brawn, Derek A. & Šević, Aleksandar, 2018. "“Firm size matters: Industry sector, firm age and volatility do too in determining which publicly-listed US firms pay a dividend”," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 132-152.
    18. Hayley Baker & Millicent Chang & Choy Yeing (Chloe) Ho, 2021. "Value of dividend signaling in uncertain times," International Review of Finance, International Review of Finance Ltd., vol. 21(4), pages 1419-1440, December.
    19. Kamal Anouar & Nicolas Aubert, 2016. "Does the catering theory of dividend apply to the French listed firms?," Working Papers halshs-01401867, HAL.
    20. Cave, Joshua & Lancheros, Sandra, 2024. "Local peer influence on dividend payout decisions," Journal of Banking & Finance, Elsevier, vol. 164(C).
    21. Akindayomi, Akinloye & Amin, Md Ruhul, 2022. "Does business strategy affect dividend payout policies?," Journal of Business Research, Elsevier, vol. 151(C), pages 531-550.
    22. Charmaine Glegg & Oneil Harris & Thanh Ngo, 2018. "Corporate social responsibility and the wealth gains from dividend increases," Review of Financial Economics, John Wiley & Sons, vol. 36(2), pages 149-166, April.
    23. Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Wong Woei-Chyuan, 2015. "Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 103-126.
    24. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    25. Luís Krug Pacheco & Clara Raposo, 2009. "ON the TIMING of INITIAL STOCK REPURCHASES," Working Papers de Gestão (Management Working Papers) 06, Católica Porto Business School, Universidade Católica Portuguesa.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:ijebaa:v:iv:y:2016:i:2:p:29-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ijeba.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.