Does Lintner Model Explain Dividend Payments of the Indian Banking Sector ?

Nusrathunnisa,; Duraipandian, R

doi:10.17010/ijf/2019/v13i3/142265

Cited by 1 publication

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“…Anjana and Balasubramanian (2017) state that companies tend to maintain a balance between debt and equity in their capital structure. Capital expenditure is one of the most essential variables in influencing dividend payments (Nusrathunnisa and Duraipandian, 2019). The available cash will be more limited because the firm has to pay its debts.…”

Section: Ajarmentioning

confidence: 99%

Dividend policy and residual dividend theory: evidence from Indonesia

Wirama,

Krisnadewi,

Artini

et al. 2024

AJAR

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PurposeUsing the residual dividend theory, this study examines the impact of capital expenditures and working capital on the dividend policies of publicly listed companies in Indonesia.Design/methodology/approachUsing data on public companies (other than those in the financial sector) listed on the Indonesia Stock Exchange from 2011 to 2020, this study collected 870 observations (firm-years). This study employs a regression analysis technique using the STATA application program. The main variables in this study are capital expenditure and working capital, and the control variables are sales growth, firm size, leverage, profitability, liquidity and dummy variables for state-owned enterprises. The dependent variable of dividend policy is proxied by the dividend payout ratio.FindingsThis study’s results support the residual dividend theory’s hypothesis, in which capital expenditure negatively affects a company’s dividend policy. This study also analyzes this effect on companies that pay cash dividends at quantile positions of 25, 30, 50 and 60. The results show that the effect of capital expenditure on cash dividend payments is more pronounced in the case of companies whose cash dividends are in the 50th quantile. This result holds across different specification and endogeneity tests.Originality/valueThis study analyzes the residual dividend theory in Indonesian companies, focusing on localized factors and investment priorities. It challenges traditional Western dividend policies and provides empirical data that enhances the theory’s robustness. The findings have practical implications for investors, policymakers and corporate decision-makers in the Indonesian market.

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Section: Ajarmentioning

confidence: 99%