S Martono, - and Arief Yulianto, FE Manajemen and Rini Setyo Witiastuti, - and Angga Pandu Wijaya, - (2020) The Role of Institutional Ownership and Industry Characteristics on the Propensity to Pay Dividend: An Insighat from Company Open Innovation. Journal of Open Innovation: Technology, Market, and Complexity, 6 (3). pp. 1-16. ISSN 2199-8531

Preview	PDF - Published Version Download (4MB) | Preview
Preview	PDF - Published Version Download (156kB) | Preview

Abstract

The purpose of this study is to test the free cash flow agency theory hypothesis; namely, (a) whether di�erences in industrial sector a�ect a company’s propensity to pay dividends, and (b) whether institutional ownership is able to substitute for the propensity to pay dividends as a bonding mechanism. The analysis uses logistic regression to explore the existence of institutional ownership as a substitute for paying cash dividends in companies belonging to di�erent industrial sectors. The results show that companies in the manufacturing sector have a greater propensity to pay dividends compared to those in non-manufacturing sectors. The results also indicate that low institutional ownership, as an external monitoring mechanism, can substitute for increasing the propensity to pay dividends. Overall, the results are consistent with implications in dividend policy. The results support the notion that the propensity to pay dividends accommodates di�erent behavioral factors, considering sectoral di�erences. In addition, the results illustrate the relevance of alternative theories in explaining dividend policy from the perspective of agency theory. The results show that sectoral comparisons, in addition to institutional ownership factors, play important roles in the propensity of Indonesian companies to pay dividends. This study shows that each industry sector has di�erent income characteristics, which a�ect the di�erences in propensity to pay dividends.

Actions (login required)

View Item