Agency conflict: Simultaneous equation analysis of institutional ownership, debt policy and dividend policy

DOROTHEA REETTA PRANARI, Prof. Eduardus Tandelilin M.B.A

2013 | Skripsi | MANAJEMEN

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This research aims to define the relationship between institutional ownership, debt and dividend policies under Indonesian ownership structure in reducing agency conflict. Based on the results of the analysis, institutional ownership and debt has a negative and significant influence on agency conflict while dividend has a positive influence on agency conflict in manufacturing firms in Indonesian Stock Exchange. The hypothesis testing in this research was performed using panel data regression analysis and simultaneous panel data. The test results reveal that institutional ownership and debt policy are proven to be substitutes. On the otherhand, institutional ownership and dividend policy aswell as dividend policy and debt policy are not proven to be substitutes. Ultimately, these results lead us to the conclusion that the use of debt and increasing the proportion of institutional ownership are effective mechanisms to reduce agency costs. In addition to this, firms substitute debt policy for institutional ownership in controlling agency conflict.

Kata Kunci : Agency conflict, debt policy, dividend policy, institutional ownership