#TITLE_ALTERNATIVE#

• Main Author: RATNA PRAMESI (NIM 19005045), DWITYA
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/10285
• Institution: Institut Teknologi Bandung

Once a company makes a profit, they must decide on what to do with those profits. They could use that profits to reinvest and expand the business or they could pay out the profits to the owners of the firm in the form of dividends. Since dividends have an effect on stock prices and company's future growth, corporate governance should have a suitable dividend strategy. Corporate management needs to know the condition of the company in their past and future to get the right decision about the amount and payment time of the dividend payout. There are some factors that have some influences on dividend payout decisions and policies, beside the condition of the company; it depends on the preferences of investors and potential investors. Company has several considerations to make a dividend policy and trend analyses of the dividend pattern. In addition, the stockholders could know the value of current dividend, if the past dividend has significant correlation. From the pay-out ratio, it can know the financial condition of the company, how safe a dividend (low is good, because they use more profits to reinvest) and how willing a company is to pay out cash to shareholders (high is good).<p> <br /> <br /> <br /> <br /> This paper focus to identify the factors with an expected influence of dividend policy on payout ratios in developing market of Indonesia, this country was chosen because it represents a different market with different features. There are hundred companies from various industry become a measurement to complete this research, based on companies that listed in Kompas100. In the analyzing of the companies, the writer could know whether there is a pattern of dividend with its historical data and the earnings. The time period is from 2002 to 2006. Next, measure the relationship between pay out ratios and several variables, which are company growth, corporate earnings, corporate leverage, historical-future of the pay out ratio, also company's future earnings. For the example in Kuala Lumpur, where the benchmark is based, most companies have dividend payout policies that are not obviously connected to the company's income for the year. The Payout ratio is strongly affected by its past and affects its future. Moreover, it also could suggest to the company with high leverage to pay lower dividends from their profit and vice versa.<p> <br /> <br /> <br /> <br /> These findings might help inexperienced managers in the emerging markets to understand the dividend policy. Pearson correlation results confirmed what was suggested in the literature that current dividends are affected by its past and future. Also dividends were associated with net earnings, although less strongly. Furthermore, payout ratios have no significant association with either the current, past, or future net earnings, and the correlation between payout ratio and the company's future earning growth is insignificant. On the other hand, the company's level of leverage has a negative relationship with the payout ratio; also that payout ratio has no significant impact on the company's future earnings growth.