"The Effect of Dividend Policy on Profitability of SOEs and Private Enterprises: Evidence from Indonesia"

SUGARMAN, BERRY ,

2016 | Tesis | S2 Economics

This paper examines the relationship between dividend payout ratio and firms profitability. Using a balanced panel data set of 59 firms: consisting of 37 SOEs and 22 private-owned enterprises from 2001-2007, we empirically assess the signaling effect of dividend payout ratio on the firms profitability, both for SOEs and private-owned enterprises. We also analyze the difference in the impact of dividend payout between the two categories of firms. Our results suggest that for the government-owned sub-sample, the dividend payout ratio negatively affects the future earnings of the SOEs. In comparison, in private-owned case, the models estimate that increases in dividend paid by SOEs to the government lead to a hike in the profitability. The interaction variable in our model shows that payout ratio policy set by the shareholders has a different impact on both firms. The effects on private enterprises confirm the signaling theory, while SOEs are hurt by the dividend policy.

Kata Kunci : dividend payout ratio, firms profitability, the future earnings, SOEs, for the government-owned sub-sample.