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Foreign institutional investors and dividend policy in Indonesia

Author

Listed:
  • Sangapta Damarjati Purba

    (Universitas Sebelas Maret)

  • Tastaftiyan Risfandy

    (Universitas Sebelas Maret
    Universitas Sebelas Maret)

  • Muizzuddin Muizzuddin

    (Universitas Sriwijaya
    Universitas Gadjah Mada)

  • Muh. Rudi Nugroho

    (Universitas Islam Negeri Sunan Kalijaga)

Abstract

In this study, we investigate the nexus between foreign institutional investors (FIIs) and the dividend policy in a developing country. Using a dataset of 529 Indonesian publicly listed firms between 2010 and 2018, we find that the presence of FIIs has a significant and negative effect on firms’ dividend policy. However, we further find that the negative impact diminishes in firms with a low FII share. In the Indonesian case, although dividends could be used as a mechanism to reduce agency problems caused by information asymmetry, FIIs possibly prefer capital gains because they are subject to a higher dividend tax than domestic investors. Our study contributes to the discussion on the dividend payment puzzle, especially in developing countries.

Suggested Citation

  • Sangapta Damarjati Purba & Tastaftiyan Risfandy & Muizzuddin Muizzuddin & Muh. Rudi Nugroho, 2022. "Foreign institutional investors and dividend policy in Indonesia," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 235-245, May.
    • Handle: RePEc:pal:assmgt:v:23:y:2022:i:3:d:10.1057_s41260-022-00259-z
    DOI: 10.1057/s41260-022-00259-z
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    More about this item

    Keywords

    Foreign institutional investor; Dividend policy; Dividend payout; Indonesia;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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