The Role of Overconfident CEO to Dividend Policy in Industrial Enterprises

Abstract

Researching the influence and role of CEO overconfidence to dividend policy is important for stock market investors. Therefore, this study was conducted to find out the relationship between CEO overconfidence and dividend policy in industrial enterprises in Vietnam. Data collected from 222 industry enterprises listed on the Vietnam Stock Exchange from 2012 to 2018. Data is collected on financial statements of listed companies. GLS model with panel data is used to analyze regression results. The results show that CEO overconfidence has dividend yield higher than CEO non-overconfidence. At the same time, the dividend payout ratio of enterprises has no difference between CEO overconfidence and CEO non-overconfidence. The results also showed that revenue growth has a positive impact on dividend yield in small enterprises, but negative impact on dividend payout in large enterprises. Research results by firm size have similar results with the general analysis for all enterprises. At the same time, the analysis of ownership type shows that CEO overconfidence has a positive impact on dividend yield of non-state enterprises without affecting other types of enterprises. From these results, the authors also made a number of recommendations to help investors choose businesses to invest in accordance with their strategies.

Effect of Liquidity, Profitability, Leverage, and Firm Size on Dividend Policy

“…Dividends are profits from companies that are distributed to shareholders. Dividend policy is an integral part of a company's funding decision, which will be distributed to shareholders and reinvested or retained in the company (Hoang et al, 2020;Nam, 2019). If the company chooses to distribute profits as dividends, it will reduce retained earnings and subsequently reduce total internal or internal financing sources.…”

“…Dividend policy is an integral part of the company's funding decisions. It is a choice whether profits earned by the company at the end of the year will be distributed to shareholders as dividends or the benefits will be retained to increase capital for investment financing in the future (Miller & Rock, 1985;Kato et al, 2002;Hoang et al, 2020).…”

The Effect of Profitability and Liquidity on Dividend Policy

“…Usually set by the company's board of directors, with input from senior management (Maladjian, 2013). Dividend policy is an integral part of a company's funding decisions, which will be distributed to shareholders and reinvested or held in the company (Hoang et al, 2020). Dividend payout ratio is one of the ratio calculations used to measure dividend policy in a company.…”

“…Dividends are company profits distributed to shareholders (Pattiruhu & Paais, 2020). Dividend policy is an integral part of a company's funding decisions, which will be distributed to shareholders and reinvested or held in the company (Hoang et al, 2020). However, there are indications of difficulty in considering dividend policy because management needs to determine whether the profits earned by the company at the end of the year will be distributed to shareholders as dividends or profits will be used as retained earnings to be reinvested in projects that benefit the company's growth.…”

Pembayaran Dividen dan Investment Opportunity terhadap Kinerja Keuangan

“…Hal tesebut secara tidak langusng akan berdampak kurang baik, terlebih bagi perusahaan yang baru. Perusahaan dengan dividen tinggi cenderung menarik investor yang lebih memilih jaminan aliran pendapatan yang stabil daripada potensi pertumbuhan harga saham yang tinggi [6]. Sebaliknya, perusahaan dengan pembayaran dividen yang rendah berarti perusahaan tersebut menginvestasikan kembali dalam pertumbuhan bisnis, sehingga keuntungan modal masa depan yang lebih tinggi bagi investor.…”