Determinants of Dividend Policy: An Empirical Study of Consumer Goods Firms in Indonesia

This research aims to figure out the determinants of firms' dividend policy (propensity to pay dividends as well as the ratio of dividend payout). A dividend policy is a policy used by a company to decide how much it will pay out to shareholders in the form of dividends. Usually, a company retains a part of its earnings and distributes the other part as a dividend. We employed two regression models, Model 1 adopts the logistic regression, while Model 2 adopts the multiple regression to meet the research objectives. Through the purposive sampling technique which complies with the stipulated criteria, a total of 38 samples of Model 1 and 20 samples of Model 2 from the consumer goods sector in the year 2015-2018 are selected to represent the entire population. Among the five independent variables being tested, profitability and firm size reveal a significant impact on both firm's propensity to pay dividends and dividend payout ratio, while investment opportunity set and capital structure expose a statistically significant effect on dividend payout ratio, yet showed insignificant results on the dividend-paying decision. On the contrary, stock liquidity reveals no effect on both models and therefore fails to espouse the liquidity hypothesis of dividends. All independent variables exhibit a simultaneous influence on both response variables.