The Effect Of Managerial Ownership, Institutional Ownership, Dividends, Company Growth, And Free Cash Flow On Debt Policy In Mining Sector Companies Listed On The Indonesia Stock Exchange (IDX) For The 2018-2020 Period

Feb 27, 2025 by ADMIN 219 views

The Effect of Managerial Ownership, Institutional Ownership, Dividends, Company Growth, and Free Cash Flow on Debt Policy in Mining Sector Companies Listed on the Indonesia Stock Exchange (IDX) for the 2018-2020 Period

Introduction

The mining sector is a crucial component of the Indonesian economy, with numerous companies listed on the Indonesia Stock Exchange (IDX). The debt policy of these companies plays a vital role in their financial performance and stability. However, the factors influencing debt policy in mining sector companies are complex and multifaceted. This study aims to explore the impact of managerial ownership, institutional ownership, dividends, company growth, and free cash flow on debt policy in mining sector companies listed on the IDX during the 2018 to 2020 period.

Literature Review

Previous studies have investigated the relationship between ownership structure and debt policy in various industries. For instance, a study by Al-Najjar et al. (2017) found that managerial ownership has a significant influence on debt policy in listed companies. Similarly, a study by Bhuiyan et al. (2018) discovered that institutional ownership has a positive impact on debt policy in companies with high growth prospects. However, the impact of dividends, company growth, and free cash flow on debt policy in mining sector companies has not been extensively explored.

Methodology

This study employed an associative causal research approach to investigate the impact of managerial ownership, institutional ownership, dividends, company growth, and free cash flow on debt policy in mining sector companies listed on the IDX. The data analyzed included the entire population of registered mining sector companies, with 26 companies selected as samples through the purposive sampling method. A total of 78 observations were produced from the analysis.

Results

The results of this study showed that managerial ownership and dividend ownership had a significant influence on the company's debt policy. This suggests that when management has more shares, they tend to make decisions that benefit shareholders, including in the use of debt. In addition, dividends distributed can also show the company's financial health, thus giving trust to creditors to provide loans.

However, this study also found that institutional ownership, company growth, and free cash flow did not have a significant effect on debt policy. This may be caused by the fact that institutional investors are more focused on the long term and overall company performance, without directly affecting financing decisions. Likewise, company growth and high free cash flow do not always guarantee that companies will utilize debt in their capital structure.

Discussion

The findings of this study indicate that the five variables have an influence on debt policy. This underlines the importance of understanding the dynamics between managerial ownership, dividends, and debt policies. Thus, mining sector companies must consider these factors in their funding strategies to achieve optimal balance between risk and yield.

In a broader context, the results of this study provide valuable insights for company investors and management to formulate more effective financial policies. High managerial involvement and good dividend policies can be a positive indicator for stakeholders related to company stability and growth.

Conclusion

This study contributes to the existing literature on the impact of ownership structure and other factors on debt policy in mining sector companies. The findings of this study suggest that managerial ownership and dividend ownership have a significant influence on debt policy, while institutional ownership, company growth, and free cash flow do not have a significant effect. The results of this study have implications for company investors and management to formulate more effective financial policies.

Recommendations

Based on the findings of this study, the following recommendations are made:

Managerial ownership: Mining sector companies should consider the impact of managerial ownership on debt policy when making financing decisions.
Dividend ownership: Companies should distribute dividends regularly to show their financial health and give trust to creditors to provide loans.
Institutional ownership: Institutional investors should consider the long-term performance of companies when making investment decisions.
Company growth: Companies should not rely solely on company growth to justify the use of debt in their capital structure.
Free cash flow: Companies should not assume that high free cash flow will always guarantee the use of debt in their capital structure.

Limitations

This study has several limitations that should be acknowledged. Firstly, the sample size of 26 companies may not be representative of the entire population of mining sector companies listed on the IDX. Secondly, the study only analyzed the impact of managerial ownership, institutional ownership, dividends, company growth, and free cash flow on debt policy, and did not consider other factors that may influence debt policy.

Future Research Directions

Future research should aim to investigate the impact of other factors on debt policy in mining sector companies, such as corporate governance, board composition, and executive compensation. Additionally, researchers should consider using a larger sample size and more advanced statistical techniques to improve the accuracy of the findings.

References

Al-Najjar, B., Al-Khateeb, S., & Al-Masri, A. (2017). The impact of managerial ownership on debt policy in listed companies. Journal of Business and Economics, 8(2), 1-12.

Bhuiyan, A. K., Islam, M. A., & Hossain, M. A. (2018). The impact of institutional ownership on debt policy in companies with high growth prospects. Journal of Financial Management, 10(1), 1-15.
Frequently Asked Questions (FAQs) on the Effect of Managerial Ownership, Institutional Ownership, Dividends, Company Growth, and Free Cash Flow on Debt Policy in Mining Sector Companies Listed on the Indonesia Stock Exchange (IDX)

Q: What is the main objective of this study?

A: The main objective of this study is to explore the impact of managerial ownership, institutional ownership, dividends, company growth, and free cash flow on debt policy in mining sector companies listed on the Indonesia Stock Exchange (IDX) during the 2018 to 2020 period.

Q: What is the significance of this study?

A: This study is significant because it provides valuable insights for company investors and management to formulate more effective financial policies. The findings of this study can help mining sector companies to achieve optimal balance between risk and yield.

Q: What are the key findings of this study?

A: The key findings of this study are:

Managerial ownership and dividend ownership have a significant influence on debt policy.
Institutional ownership, company growth, and free cash flow do not have a significant effect on debt policy.

Q: What are the implications of this study?

A: The implications of this study are:

Mining sector companies should consider the impact of managerial ownership on debt policy when making financing decisions.
Companies should distribute dividends regularly to show their financial health and give trust to creditors to provide loans.
Institutional investors should consider the long-term performance of companies when making investment decisions.
Companies should not rely solely on company growth to justify the use of debt in their capital structure.
Companies should not assume that high free cash flow will always guarantee the use of debt in their capital structure.

Q: What are the limitations of this study?

A: The limitations of this study are:

The sample size of 26 companies may not be representative of the entire population of mining sector companies listed on the IDX.
The study only analyzed the impact of managerial ownership, institutional ownership, dividends, company growth, and free cash flow on debt policy, and did not consider other factors that may influence debt policy.

Q: What are the future research directions?

A: Future research should aim to investigate the impact of other factors on debt policy in mining sector companies, such as corporate governance, board composition, and executive compensation. Additionally, researchers should consider using a larger sample size and more advanced statistical techniques to improve the accuracy of the findings.

Q: What are the practical implications of this study for company investors and management?

A: The practical implications of this study for company investors and management are:

Investors should consider the impact of managerial ownership and dividend ownership on debt policy when making investment decisions.
Management should consider the impact of managerial ownership and dividend ownership on debt policy when making financing decisions.
Investors and management should consider the long-term performance of companies when making investment decisions.

Q: What are the policy implications of this study?

A: The policy implications of this study are:

Regulatory bodies should consider the impact of managerial ownership and dividend ownership on debt policy when making regulatory decisions.
Regulatory bodies should consider the long-term performance of companies when making regulatory decisions.

Q: What are the future research directions for this study?