Indonesia’s Dividend Policy Determinants Analysis

Abstract

Dividend payment policy serves as a key consideration for investors when making investment decisions in a particular firm. This policy can be influenced by various financial and non-financial factors, including liquidity, profitability, leverage, firm growth, firm size, prior year dividends, corporate taxation, free cash flow, and retained earnings. This study aims to examine the determinants of dividend payment policy in non-financial companies listed on the Indonesia Stock Exchange (IDX), by analyzing data from 291 firms over the period 2018 to 2022. The regression analysis, employing the Pooled Ordinary Least Squares (Pooled OLS) method, reveals that profitability, firm size, previous year’s dividends, corporate tax, free cash flow, and retained earnings have a significant positive impact on dividend payment policy. Conversely, leverage and firm growth exhibit a negative effect, while liquidity is found to have no significant influence. These findings suggest that companies with higher profitability and stronger internal cash holdings are more likely to distribute dividends. The study also highlights that industry sectors may play a critical role in shaping a firm's dividend payment policy