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The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: Evidence from Indonesia

Moin, Abdul, Guney, Yilmaz and El Kalak, Izidin 2020. The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: Evidence from Indonesia. Review of Quantitative Finance and Accounting 55 , pp. 857-900. 10.1007/s11156-019-00862-z

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Abstract

We investigate how a firm’s decision to hold excessive cash or to overinvest could influence its dividend payout policy in Indonesia. Additionally, we examine the association between corporate ownership structure and cash dividends. Using a data set of Indonesian listed firms for the period from 1995 to 2014, we find that excessive cash holding (overinvestment) positively (negatively) affects a firm’s likelihood of paying dividends. Also, we find that family, foreign, state and institutional ownership have significantly negative links with dividends, which suggests the signals of expropriation of firms’ wealth by major shareholders. These findings strongly support the expropriation hypothesis that commonly applies to firms with higher level of concentration or to firms in a weak legal environment by which the rights of minority interests are put at risk by large shareholders.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Additional Information: This article is licensed under a Creative Commons Attribution 4.0 International License
Publisher: Springer Verlag
ISSN: 0924-865X
Date of First Compliant Deposit: 22 November 2019
Date of Acceptance: 15 November 2019
Last Modified: 02 Sep 2020 13:40
URI: http://orca.cf.ac.uk/id/eprint/127032

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