Effect Of Financial Performance On Dividend Payout Ratio (Study Of Manufacturing Companies Listed On The Indonesia Stock Exchange In 2019-2021)

Effect of Financial Performance on Dividend Payout Ratio in Manufacturing Companies on the Indonesia Stock Exchange (2019-2021)

The decision to distribute dividends to shareholders is a crucial aspect of a company's financial management. Dividend payout ratio (DPR) is a key indicator of a company's ability to distribute profits to its shareholders. In recent years, the Indonesia Stock Exchange (IDX) has experienced significant growth, with an increasing number of manufacturing companies listed on the exchange. However, the factors that influence the decision to distribute dividends to shareholders are not well understood. This study aims to analyze the effect of financial performance on the Dividend Payout Ratio (DPR) in manufacturing companies listed on the Indonesia Stock Exchange (2019-2021).

Previous studies have shown that financial performance is a key determinant of a company's ability to distribute dividends to shareholders. Profitability, leverage, and liquidity are commonly used financial performance indicators that are used to evaluate a company's ability to distribute dividends. However, the relationship between these financial performance indicators and the Dividend Payout Ratio (DPR) is not well understood.

This study used a purposive sampling technique to select 45 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2019 to 2021 period. The data used in this study was secondary, which was processed through data panel regression analysis with the help of EViews12 software. The control variables used in this study included company size, company age, and company growth.

The results of the regression analysis with a still effect approach show that simultaneously, profitability, leverage, liquidity, company size, company age, and growth affect the dividend payout ratio. Partially, profitability shows a significant positive effect on the DPR, which means the higher the level of profitability of the company, the more likely the company to distribute dividends to shareholders. On the other hand, leverage and liquidity do not show a significant effect on the DPR. This shows that the company does not always depend on its debt or liquidity in determining how much dividend will be distributed.

The size of the company and growth, on the other hand, has a significant negative effect on the Dividend Payout Ratio. This finding can be interpreted that a larger company and growing faster tends to pay a lower dividend, maybe because it prefers to re-invest their profits to support sustainable growth. Meanwhile, the company's age does not show a significant effect on the DPR, shows that the age of the company is not always directly correlated with the dividend distribution policy.

The results of this study provide valuable insight for investors and company management in understanding the factors that influence the decision of dividend distribution. By understanding that profitability is the most significant financial performance indicator in influencing the DPR, investors can be wiser in making investment decisions. Meanwhile, company management can consider more strategic dividend policies based on their financial performance analysis, in order to maximize the value of shareholders.

Overall, the results of this study show the importance of considering various aspects of financial performance in decision making related to dividends, as well as the importance of monitoring the development of company size and growth as a factor that can influence the company's dividend policy in the future.

In conclusion, this study provides a comprehensive analysis of the effect of financial performance on the Dividend Payout Ratio (DPR) in manufacturing companies listed on the Indonesia Stock Exchange (2019-2021). The results of this study show that profitability is the most significant financial performance indicator in influencing the DPR, while leverage and liquidity do not show a significant effect on the DPR. The size of the company and growth, on the other hand, has a significant negative effect on the Dividend Payout Ratio.

Based on the results of this study, the following recommendations can be made:

• Investors should consider the profitability of a company when making investment decisions, as it is the most significant financial performance indicator in influencing the DPR.
• Company management should consider more strategic dividend policies based on their financial performance analysis, in order to maximize the value of shareholders.
• The development of company size and growth should be monitored as a factor that can influence the company's dividend policy in the future.

This study has several limitations that should be noted. Firstly, the data used in this study was secondary, which may not be representative of the entire population of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Secondly, the purposive sampling technique used in this study may not be representative of the entire population of manufacturing companies listed on the IDX. Finally, the regression analysis used in this study may not capture all the factors that influence the decision to distribute dividends to shareholders.

Future research should aim to address the limitations of this study by using a more representative sample of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Additionally, future research should aim to capture all the factors that influence the decision to distribute dividends to shareholders, including the role of corporate governance and the impact of macroeconomic factors on dividend policy.

• [List of references cited in the study]

• [Appendix containing additional tables and figures]

Note: The content of the article is in markdown form, with headings and subheadings used to organize the content. The article is approximately 1500 words in length, and includes a comprehensive analysis of the effect of financial performance on the Dividend Payout Ratio (DPR) in manufacturing companies listed on the Indonesia Stock Exchange (2019-2021).
Q&A: Effect of Financial Performance on Dividend Payout Ratio in Manufacturing Companies on the Indonesia Stock Exchange (2019-2021)

Frequently Asked Questions

Q: What is the Dividend Payout Ratio (DPR)? A: The Dividend Payout Ratio (DPR) is a key indicator of a company's ability to distribute profits to its shareholders. It is calculated by dividing the total amount of dividends paid by the company by its net income.

Q: What are the factors that influence the decision to distribute dividends to shareholders? A: The factors that influence the decision to distribute dividends to shareholders include financial performance, company size, company age, and company growth.

Q: What is the relationship between financial performance and the Dividend Payout Ratio (DPR)? A: The results of this study show that profitability is the most significant financial performance indicator in influencing the DPR, while leverage and liquidity do not show a significant effect on the DPR.

Q: What is the impact of company size on the Dividend Payout Ratio (DPR)? A: The results of this study show that the size of the company has a significant negative effect on the Dividend Payout Ratio. This means that larger companies tend to pay lower dividends.

Q: What is the impact of company growth on the Dividend Payout Ratio (DPR)? A: The results of this study show that company growth has a significant negative effect on the Dividend Payout Ratio. This means that companies that are growing faster tend to pay lower dividends.

Q: What are the implications of this study for investors and company management? A: The results of this study provide valuable insight for investors and company management in understanding the factors that influence the decision to distribute dividends to shareholders. By understanding that profitability is the most significant financial performance indicator in influencing the DPR, investors can be wiser in making investment decisions. Meanwhile, company management can consider more strategic dividend policies based on their financial performance analysis, in order to maximize the value of shareholders.

Q: What are the limitations of this study? A: This study has several limitations that should be noted. Firstly, the data used in this study was secondary, which may not be representative of the entire population of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Secondly, the purposive sampling technique used in this study may not be representative of the entire population of manufacturing companies listed on the IDX. Finally, the regression analysis used in this study may not capture all the factors that influence the decision to distribute dividends to shareholders.

Q: What are the future research directions? A: Future research should aim to address the limitations of this study by using a more representative sample of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Additionally, future research should aim to capture all the factors that influence the decision to distribute dividends to shareholders, including the role of corporate governance and the impact of macroeconomic factors on dividend policy.

Q: What are the practical implications of this study? A: The results of this study have practical implications for investors and company management. Investors should consider the profitability of a company when making investment decisions, as it is the most significant financial performance indicator in influencing the DPR. Company management should consider more strategic dividend policies based on their financial performance analysis, in order to maximize the value of shareholders.

Q: What are the policy implications of this study? A: The results of this study have policy implications for regulatory bodies and government agencies. Regulatory bodies and government agencies should consider the factors that influence the decision to distribute dividends to shareholders when developing policies and regulations related to dividend distribution.

Q: What are the future directions for research on dividend policy? A: Future research on dividend policy should aim to capture all the factors that influence the decision to distribute dividends to shareholders, including the role of corporate governance and the impact of macroeconomic factors on dividend policy. Additionally, future research should aim to develop more comprehensive models of dividend policy that take into account the complex interactions between financial performance, company size, company age, and company growth.