Analysis of Leverage, Managerial Ownership, and Dividend Policy in Agency Theory Perspective

William Tjong, Stevanie Stevanie

Abstract


The purpose of this research is to test the effect of leverage, managerial ownership, and dividend policy on agency conflict. The agency conflict in this study is proxied by the value of the company measured through Tobin's Q Ratio, while the independent variables use leverage, managerial ownership, and dividend policy. The partial analysis tools in this study used Ordinary Less Square (OLS). Samples are companies listed on Indonesia Stock Exchange for the period of study. The results of this study are leverage has a negative relationship in reducing agency conflict in companies, managerial ownership does not affect the firm value, and dividend policy has a positive and significant effect in reducing agency conflict in companies.


Keywords


agency conflict; leverage; managerial ownership; dividend policy; 2SLS; Tobin's Q ratio

Full Text:

PDF

References


Kuncoro, Ahmad Engkos and Riduwan. (2008). Path analysis. Alfabeta, Bandung.

Agrawal, A. and C.R.Knoeber. (1996). Firm Performance and Mechanisms to Control Agency Problems Between Managers and Shareholders. Journal of Financial and Quantitative Analysis, 31, 377-397.

Bathala, C., Moon, K., and Rao, R. (1994). Managerial Ownership, Debt Policy, and the Impact of Institutional Holdings: An Agency Perspective. Financial Management, 23 (Autumn), 38-50.

Beiner S., Drobetz W., Schmid M.M., and Zimmermann H. (2006). An Integrated Framework of Corporate Governance and Firm Valuation. European Financial Management, 12 (2), 249-283.

Brigham, Eugene F. and Daves, Philip R. (2004). Intermediate Financial Management, 8thth edition. Thomson-South Western, USA.

Brigham, Eugene F. and Ehrhardt, M. C. (2008). Financial Management theory and practice. Thomson-South Western, USA.

Chaganti, R. and Damanpour, F. (1991). Institutional Ownership, Capital Structure, and Firm Performance. Strategic Management Journal, 12, 479-491.

Chen, Carl. R. and Steiner, Thomas L. (1999). Managerial Ownership and Agency Conflicts: A Nonlinear Simultaneous Equation analysis of Managerial Ownership, Risk Taking, Debt Policy, and Dividend Policy. The Financial Review, 34, 119-136.

Crutchley, C.E and Hansen. (1989). A Test of Agency Theory of Managerial Ownership Corporate Leverage and Corporate Dividend. Financial Management, 18 (4), 34-36.

Dempsey, S.J., Laber, G., and Rozeff, M.S. (1993). Dividend Policies in Practice: Is there any industry effect?. Quarterly Journal of Business and Economics, 32, 3-13.

Dessi, R. and D. Robertson. (2003). Debt, Incentives and Performance: Evidence from UK Panel Data. Economic Journal, 113, 903-919.

Easterbrook, F. (1984). Two Agency-Cost Explanations of Dividend. American Economic Review, 74(4), 650-659.

Emery, Douglas. and John D. Finnerty. (1997). Corporate Financial Management. Prentice-Hall International Inc, New Jersey.

Fama, E.F., and K.R. French. (1992). The Cross-Section of Expected Stock Returns, Journal of Finance, XLVII (2), 427-465.

Fama, E.F., and K.R. French. (1995). Size and Book to Market Factors in Earning and Returns. Journal of Finance, L(1), 131-155.

Fama, E. F. (1980). Agency problem and the theory of the firm. Journal of Political Economy, 88(2), 288-307.

Faccio, Mara, Lang, Larry H.P., and Leslie Young. (2003). Debt and Expropriation. Working Paper of Chinese University of Hong Kong, 1-35.

Friend, I. and Lang, L. H. P. (1988). An Empirical Test of the Impact of Managerial Self-interest on Corporate Capital Structure. The Journal of Finance, 43(2), 271-282.

Gedajlovic, E. R., Shapiro, D., and Buduru, B. (2003). Financial Ownership, Diversification and Firm Profitability in Japan. Journal of Management and Governance, 7(3), 315-335.

Gujarati, Damodar. (2003). Basic Econometrics, 4thth edition. McGraw-Hill, New York.

Hartono, J. (2004). Business Research Methodology. BPFE, Yogyakarta.

Husnan, Suad. (2000). Financial Management and Implementation (Long-Term Decisions). BPFE, Yogyakarta.

Jensen, M. and Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure. Journal of Financial and Quantitative Analysis. 27(2), 247-263.

Jensen, Michael C. (1986). Agency Cost of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review, 76 (2), 323-329.

Jensen, Solberg, and Zorn. (1992). Simultaneous Determination of Insider Ownership, Debt and Dividend Policies. Journal of Financial Economics, 3, 305-360.

John, K. and Williams, J. (1985). Dividends, Dilution and Taxes: A Signaling Equilibrium. Journal of Finance, 40, 1053-1070.

La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer. (1999). Corporate Ownership Around the World. The Journal of Finance, 54 (2), 471-517.

Lange, H. P. and Sharpe, I. G. (1995). Monitoring Costs and Ownership Concentration: Australian Evidence. Applied Financial Economics, 5(2), 441-444.

Lemmon, Michael, and Karl V. Lins. (2003). Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis. The Journal of Finance, 58 (4), 1445-1468.

Mahadwartha, P.A. (2002). Interdependence Between Financing Policy and Dividend Policy: An Agency Theory Perspective, Journal of Accounting Research, Management, Economics STIE-Yogyakarta, 1-34

Mahadwartha, P.A. (2003). Predictability Power of Dividend Policy and Leverage Policy to Managerial Ownership: An Agency Theory Perspective. Indonesian Journal of Economics and Business, 18(3), 288-297.

Megginson, William. (1997), Capital Structure Theory, Corporate Finance Theory. Addison-Wesley Educational Publishers Inc, USA.

Miller, M. and Rock, K. (1985) Dividend Policy Under Asymmetric Information. Journal of Finance, 40, 1031-1051.

Mintzberg, Henry. (1983). Structure in Fives: Designing effective Organizations. Prentice Hall, New Jersey.

Myers, S. (1977) Determinants of Corporate Borrowing. Journal of Financial Economics, 5(2), 147-175.

Myers, S. C. and Majluf, N. S. (1984). Corporate Financing and Investment Decisions When Firms Have Information that Investors Do Not Have. Journal of Financial Economics. 13(2), 187-221.

Nazir, M. (1988). Research Methods. Ghalia Indonesia, Jakarta.

Parrino, R., and Weisbach, M.S. (1999). Measuring Investment Distortions Arising From Stockholder-Bondholder Conflicts. Journal of Financial Economics, 53, 3-42.

Pedersen, Torben, and Steen Thomsen. (2003). Ownership Structure and Value of the Largest European Firms. Journal of Management and Governance, 7, 2

Penman, S.H. (2001). On Comparing Cash Flow and Accrual Accounting Models for Use in Equity Valuation. Columbia University, 310.

Riyanto, Bambang. (1995). Fundamentals of Corporate Finance. BPFE, Yogyakarta.

Ross, S.A., Westerfield, R. and Jaffe, J. (2009). Financial Management, 8thth edition. McGraw-Hill, New York.

Sartono, Agus. (2008). Financial Management Theory and Application. BPFE, Yogyakarta.

Shleifer, A. and Vishny, R.W. (1997), A Survey of Corporate Governance, Journal of Financial Economics, 52(2), 737-83.

Scott, William R. (2000). Financial Accounting Theory Second Edition. Prentice Hall, Canada.

Sugiyono. (2010). Statistics for Research. Alfabeta, Bandung.

Sugiyono. (2014). Methods Research Education Approaches Quantitative, Qualitative, and R&D Approaches. Alfabeta, Bandung.

Sumodiningrat, Gunawan. (2001). Introductory Econometrics. BPFE, Yogyakarta.

Susilowati, F. (2013). Agency Conflict: Simultaneous Analysis of Managerial Ownership, Debt Policy, and Dividend Policy (unpublished thesis). Gadjah Mada University, Yogyakarta.

Suteja, Jaja. and Desi Lutpianti. (2016). Managerial Ownership, Debt Policy, and Dividend Policy: A Test on Theory of Agency. Serials Publications, 13(1), 243-259.

Syamsudin, Lukman. (2007). Company Financial Management. PT Raja Grafindo Persada, Jakarta.

Titman, S. and Wessels, R. (1988). The Determinants of Capital Structure Choice. The Journal of Finance, 43(1), 1-19.

Tobin, J. (1969). A General Equilibrium Approach to Monetary Theory. Journal of Money, Credit and Banking, 1(1), 12-29.

Vo, D.H., and Nguyen V.T.Y. (2014). Managerial Ownership, Leverage and Dividend Policies: Empirical Evidence from Vietnam's Listed Firms. International Journal of Economics and Finance, 6(5), 274.

Wruck, K. H. (1990). Financial Distress, Reorganization, and Organizational Efficiency. Journal of Financial Economics, 27, 419-444.

Zhuang, J., Edwards, D., and Capulong, M. V. A. (2000). Corporate Governance and Finance in East Asia, A Study of Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand. Asian Development Bank


Refbacks

  • There are currently no refbacks.


 Fakultas Ekonomi dan Bisnis | Universitas Pelita Harapan | Kampus Universitas Pelita Harapan | Gedung F Lt. 12 | Lippo Karawaci, Tangerang - 15811 | Telp 021-5460901 | Fax 54210992