Open AccessDIVIDEND PAYOUT RATIO: FACTORS THAT AFFECT IT, AND SUBSEQUENT EARNING GROWTH
Author(s) -
Antoni Susanto,
Junius Tirok
Publication year - 2013
Publication title -
journal of applied finance and accounting/journal of applied finance and accounting
Language(s) - English
Resource type - Journals
eISSN - 2746-6019
pISSN - 1979-6862
DOI - 10.21512/jafa.v6i1.838
Subject(s) - dividend payout ratio , profitability index , business , stock exchange , leverage (statistics) , earnings , dividend , maturity (psychological) , earnings growth , monetary economics , econometrics , economics , accounting , dividend policy , finance , statistics , mathematics , psychology , developmental psychology
This paper is to investigate the determinants of the Dividend Payout Ratio (DPR) of Indonesian firms. Five factors (maturity, cash availability, leverage, profitability, firm size) are analyzed as the DPR determinants. Additionally, this thesis also examines the ability of DPR to serve as a signal subsequent year’s earnings growth. Multiple regression models is used in this paper to analyze research sample that consists of 180 firms that are listed in Indonesia Stock Exchange (IDX) and paid dividends during 2003-2008. The results shows that cash availability and maturity are significant determinants of DPR. Further analysis shows that the DPR signals subsequent earnings growth, the result concludes that mature firms has high dividend payment ratio, which supports firm lifecycle theory. High DPR results in high subsequent earnings growth, which supports Black’s (1976) claim that DPR carries information on future growth.