Foreign institutional investors and dividend policy in Indonesia

Sangapta Damarjati Purba (), Tastaftiyan Risfandy (), Muizzuddin Muizzuddin and Muh. Rudi Nugroho ()
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Sangapta Damarjati Purba: Universitas Sebelas Maret
Tastaftiyan Risfandy: Universitas Sebelas Maret
Muh. Rudi Nugroho: Universitas Islam Negeri Sunan Kalijaga

Journal of Asset Management, 2022, vol. 23, issue 3, No 4, 235-245

Abstract: Abstract In this study, we investigate the nexus between foreign institutional investors (FIIs) and the dividend policy in a developing country. Using a dataset of 529 Indonesian publicly listed firms between 2010 and 2018, we find that the presence of FIIs has a significant and negative effect on firms’ dividend policy. However, we further find that the negative impact diminishes in firms with a low FII share. In the Indonesian case, although dividends could be used as a mechanism to reduce agency problems caused by information asymmetry, FIIs possibly prefer capital gains because they are subject to a higher dividend tax than domestic investors. Our study contributes to the discussion on the dividend payment puzzle, especially in developing countries.

Keywords: Foreign institutional investor; Dividend policy; Dividend payout; Indonesia (search for similar items in EconPapers)
JEL-codes: E44 G11 G15 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41260-022-00259-z

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