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THE ROLE OF OWNERSHIP ON BEHAVIOR OF DIVIDEND PAYERS

Year 2016, Volume: 3 Issue: 4, 59 - 68, 31.10.2016
https://doi.org/10.15637/jlecon.156

Abstract

The objectives of this study are to give empirical evidences about cash cow firms and free
cash flow theory. Conducting compare means paired samples t test and logistic regression with
samples of 141 firms which listed in Indonesia Stock Exchange for period 2009 to 2014, this study
proves dividend payers in Indonesia are not cash cows and ownership has role in determining
behavior behind dividend policy. Firms with individuals and/or public ownership both for larger and
smaller size shall pay dividends for some other intentions, but firms with institutional and/or state
ownership concerns with its size shall pay dividends because : first, they are not at cash cows status or
not under circumstance of internal conflict; second, they shall behave like cash cows in order of
conflict avoidance 

References

  • AIVAZIAN, V. A., GE, Y., & QIU, J. (2005). The impact of leverage on firm investment : Canadian evidence. Journal of Corporate Finance, 11, 277-291.
  • BARCLAY, M. J., HOLDERNESS, C. G., & SHEEHAN, D. P. (2009). Dividends and corporate shareholders. The Review of Financial Studies, 22(6), 2423-2455.
  • BRAV, A., GRAHAM, J. R., HARVEY, C. R., & MICHAELY, R. (2005). Payout policy in the 21st century. Journal of Financial Economics 77, 483-527.
  • CHANG, E. C., & WONG, S. M. L. (2004). Political control and performance in China’s Listed Firms. Journal of Comparative Economics, 32, 617-636.
  • COOPER, M. J., JACKSON III, W. E., & PATTERSON, G. A. (2003). Evidence of predictability in the cross-section of bank stock returns. Journal of Banking and Finance, 27, 817-850.
  • DEANGELO, H., DEANGELO, L., & STULZ, R. M. (2006). Dividend Policy and the Earned/Contributed Capital Mix : A Test of the Life-Cycle Theory. Journal of Financial Economics, 81(2), 227-254.
  • DECHOW, P. M. (1994). Accounting earnings and cash flows as measures of firm performance - The role of accounting accruals. Journal of Accounting and Economics, 18, 3-42.
  • EASTERBROOK, F. H. (1984). Two agency-cost explanations of dividends. The American Economic Review, 74(4), 650-659.
  • FAIRCHILD, R., GUNEY, Y., & THANATAWEE, Y. (2014). Corporate dividend policy in Thailand : Theory and Evidence. International Review of Financial Analysis, 31, 129- 151.
  • FAULKENDER, M., & WANG, R. (2006). Corporate financial policy and the value of cash. The Journal of Finance, 61(4), 1957-1990.
  • GRULLON, G., MICHAELY, R., & SWAMINATHAN, B. (2002). Are Dividend Changes a Sign of Firm Maturity? The Journal of Business, 75(3), 387-424.
  • JENSEN, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeover. American Economic Review, 76(2), 323-329.
  • JENSEN, M. C. (1988). Takeovers : Their causes and consequences. The Journal of Economic Perspectives, 2(1), 21-48.
  • KUAN, T. H., LI, C. S., & LIU, C. C. (2012). Corporate governance and cash holdings : A quantile regression approach. International Review of Economics and Finance, 24, 303-314.
  • MYERS, S. C. (2001). Capital structure. The Journal of Economic Perspectives, 15(2), 81- 102.
  • NEALE, B., MILSOM, T., HILLS, C., & SHARPLES, J. (1998). The hostile takeover process : a case study of Granada versus Forte. European Management Journal, 16(2), 230-241.
  • ROSS, S. A., WESTERFIELD, R. W., & JAFFE, J. (2008). Corporate Finance, 8th Edition. New York, NY : The McGraw-Hill Companies, Inc.
  • SHAY, J. P., & ROTHAERMEL, F. T. (1999). Dynamic competitive strategy : towards a multi-perspective conceptual framework. Long Range Planning, 32(6), 559-572.
  • THAKOR, A. V., & WILSON, P. F. (1995). Capital requirements, loan renegotiation and the borrower's choice of financing source. Journal of Banking and Finance, 19, 693-711.
  • WANG, H. (2011). Managerial entrenchment, equity payout and capital structure. Journal of Banking and Finance, 35, 36-50.

THE ROLE OF OWNERSHIP ON BEHAVIOR OF DIVIDEND PAYERS

Year 2016, Volume: 3 Issue: 4, 59 - 68, 31.10.2016
https://doi.org/10.15637/jlecon.156

Abstract

The objectives of this study are to give empirical evidences about cash cow firms and free
cash flow theory. Conducting compare means paired samples t test and logistic regression with
samples of 141 firms which listed in Indonesia Stock Exchange for period 2009 to 2014, this study
proves dividend payers in Indonesia are not cash cows and ownership has role in determining
behavior behind dividend policy. Firms with individuals and/or public ownership both for larger and
smaller size shall pay dividends for some other intentions, but firms with institutional and/or state
ownership concerns with its size shall pay dividends because : first, they are not at cash cows status or
not under circumstance of internal conflict; second, they shall behave like cash cows in order of
conflict avoidance 

References

  • AIVAZIAN, V. A., GE, Y., & QIU, J. (2005). The impact of leverage on firm investment : Canadian evidence. Journal of Corporate Finance, 11, 277-291.
  • BARCLAY, M. J., HOLDERNESS, C. G., & SHEEHAN, D. P. (2009). Dividends and corporate shareholders. The Review of Financial Studies, 22(6), 2423-2455.
  • BRAV, A., GRAHAM, J. R., HARVEY, C. R., & MICHAELY, R. (2005). Payout policy in the 21st century. Journal of Financial Economics 77, 483-527.
  • CHANG, E. C., & WONG, S. M. L. (2004). Political control and performance in China’s Listed Firms. Journal of Comparative Economics, 32, 617-636.
  • COOPER, M. J., JACKSON III, W. E., & PATTERSON, G. A. (2003). Evidence of predictability in the cross-section of bank stock returns. Journal of Banking and Finance, 27, 817-850.
  • DEANGELO, H., DEANGELO, L., & STULZ, R. M. (2006). Dividend Policy and the Earned/Contributed Capital Mix : A Test of the Life-Cycle Theory. Journal of Financial Economics, 81(2), 227-254.
  • DECHOW, P. M. (1994). Accounting earnings and cash flows as measures of firm performance - The role of accounting accruals. Journal of Accounting and Economics, 18, 3-42.
  • EASTERBROOK, F. H. (1984). Two agency-cost explanations of dividends. The American Economic Review, 74(4), 650-659.
  • FAIRCHILD, R., GUNEY, Y., & THANATAWEE, Y. (2014). Corporate dividend policy in Thailand : Theory and Evidence. International Review of Financial Analysis, 31, 129- 151.
  • FAULKENDER, M., & WANG, R. (2006). Corporate financial policy and the value of cash. The Journal of Finance, 61(4), 1957-1990.
  • GRULLON, G., MICHAELY, R., & SWAMINATHAN, B. (2002). Are Dividend Changes a Sign of Firm Maturity? The Journal of Business, 75(3), 387-424.
  • JENSEN, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeover. American Economic Review, 76(2), 323-329.
  • JENSEN, M. C. (1988). Takeovers : Their causes and consequences. The Journal of Economic Perspectives, 2(1), 21-48.
  • KUAN, T. H., LI, C. S., & LIU, C. C. (2012). Corporate governance and cash holdings : A quantile regression approach. International Review of Economics and Finance, 24, 303-314.
  • MYERS, S. C. (2001). Capital structure. The Journal of Economic Perspectives, 15(2), 81- 102.
  • NEALE, B., MILSOM, T., HILLS, C., & SHARPLES, J. (1998). The hostile takeover process : a case study of Granada versus Forte. European Management Journal, 16(2), 230-241.
  • ROSS, S. A., WESTERFIELD, R. W., & JAFFE, J. (2008). Corporate Finance, 8th Edition. New York, NY : The McGraw-Hill Companies, Inc.
  • SHAY, J. P., & ROTHAERMEL, F. T. (1999). Dynamic competitive strategy : towards a multi-perspective conceptual framework. Long Range Planning, 32(6), 559-572.
  • THAKOR, A. V., & WILSON, P. F. (1995). Capital requirements, loan renegotiation and the borrower's choice of financing source. Journal of Banking and Finance, 19, 693-711.
  • WANG, H. (2011). Managerial entrenchment, equity payout and capital structure. Journal of Banking and Finance, 35, 36-50.
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Details

Journal Section Articles
Authors

David Paul Elia Saerang This is me

Winston Pontoh This is me

Publication Date October 31, 2016
Published in Issue Year 2016 Volume: 3 Issue: 4

Cite

APA Saerang, D. P. E., & Pontoh, W. (2016). THE ROLE OF OWNERSHIP ON BEHAVIOR OF DIVIDEND PAYERS. Journal of Life Economics, 3(4), 59-68. https://doi.org/10.15637/jlecon.156