Dividend policy of Indonesian listed firms: The role of families and the state

We investigate factors influencing the dividend policy of the listed Indonesian firms by focusing on agency costs and ownership structure. Our study finds that firms with higher conflicts of interest among managers and shareholders pay lower dividends. In the context of the conflicts of interest among major and minor shareholders, we find that such conflicts would exert little impact on dividend payments. Further, we find that the family-controlled firms prefer to pay less dividends whereas the corporations with higher state ownership are associated with larger dividend payments. Our findings are in line with the argument that the Indonesian state consider corporate dividends as one of the main sources of revenues other than corporate taxes in their government budget. This issue may have adverse effects on the growth of cash-constrained small and medium-sized enterprises.