The Role of Collateralizable Asset, Profitability and Operating Cash Flow on Dividend Policy: A Study on ASEAN Non-Financial Companies

Arie Akbar; Moch Doddy Ariefianto

doi:10.36923/ijsser.v5i1.183

Open Access Article Economics

Arie Akbar ⁽¹⁾, Moch Doddy Ariefianto ⁽²⁾

(1) School of Accounting, Bina Nusantara University, Jakarta, Indonesia, Indonesia,

(2) School of Accounting, Master Accounting Bina Nusantara University, Jakarta, Indonesia, Indonesia

https://doi.org/10.36923/ijsser.v5i1.183

Issue
Vol. 5 No. 1 (2023)

Submitted
January 31, 2023

Published
March 30, 2023

Keywords:

Collateralizable asset , Profitability, Cash Flow Operating, Dividend policy

Download PDF

Abstract

This study aims to investigate the influence of collateralizable assets, profitability, and operating cash flow on dividend policy among non-financial companies in the ASEAN region. Understanding these relationships can provide valuable insights for both investors and corporate management regarding the factors that drive dividend distribution decisions. The study utilizes a panel data set of ASEAN non-financial companies obtained from the OSIRIS database, which compiles data from various stock exchanges in the region. The analysis was conducted using statistical methods to evaluate the impact of the selected variables on dividend policy, with profitability measured by return on assets (ROA) and operating cash flow considered as key indicators. The results reveal that profitability and operating cash flow significantly influence dividend policy. Profitability, as indicated by ROA, has a positive effect on dividend policy, suggesting that companies with higher profitability are more likely to distribute dividends. Conversely, operating cash flow was found to have a significant negative impact on dividend policy. Interestingly, collateralizable assets were found to have no significant effect on dividend policy. The study concludes that profitability is a critical factor in determining dividend policy, while operating cash flow also plays a significant role, albeit negatively. Collateralizable assets do not appear to influence dividend decisions. These findings highlight the importance of maintaining strong profitability to support favourable dividend policies. The implications of this study suggest that corporate management should focus on enhancing profitability to sustain or increase dividend payments. Additionally, companies should be mindful of how operating cash flow is managed, as its negative impact on dividend policy could influence investor perceptions and decisions. Future research could further explore these relationships by including more recent data and examining additional variables that may affect dividend policy.

Full text article

Generated from XML file

References

Aney, M., Ghatak, M., & Morelli, M. (2016). Credit market frictions and political failure. Journal of Monetary Economics, 81, 1-10. https://doi.org/10.1016/j.jmoneco.2016.03.012

ASEAN Secretariat. (2021). ASEAN Investment Report 2020-2021: Investing in Industry 4.0. In ASEAN Secretariat. http://investasean.asean.org/files/upload/ASEAN%0AInvestment%0AReport%0A2020-2021.pdf

Baker, H. K., Dewasiri, N. J., Yatiwelle Koralalage, W. B., & Azeez, A. A. (2019). Dividend policy determinants of Sri Lankan firms: A triangulation approach. Managerial Finance, 45(1), 2-20. https://doi.org/10.1108/MF-03-2018-0096

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143. https://doi.org/10.1016/S0304-4076(98)00009-8

Brigham, E. F., & Daves, P. R. (2018). Intermediate financial management. Cengage Learning.

Darmayanti, N. K. D., & Mustanda, I. K. (2016). Effect of sales growth, asset collateral, and company size on dividend policy in the consumer goods industry sector. Udayana University. https://erepo.unud.ac.id/id/eprint/8756

Dewasiri, N. J., Yatiwelle Koralalage, W. B., Abdul Azeez, A., Jayarathne, P., Kuruppuarachchi, D., & Weerasinghe, V. A. (2019). Determinants of dividend policy: Evidence from an emerging and developing market. Managerial Finance, 45(3), 413-429. https://doi.org/10.1108/MF-09-2017-0331

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU. www.pearson.com.au

Granda Carvajal, C. (2015). Informality and macroeconomic volatility: Do credit constraints matter? Journal of Economic Studies, 42(6), 1095-1111. https://doi.org/10.1108/JES-03-2014-0043

Henrekson, M., & Stenkula, M. (2017). The entrepreneurial rent: The value of and compensation for entrepreneurship. Journal of Entrepreneurship and Public Policy, 6(1), 11-25. https://doi.org/10.1108/JEPP-07-2016-0027

Hidayat, R. (2019). The effect of profitability, capital structure and operating cash flow on company dividend policy (Case study of manufacturing companies in the consumer goods industry sector listed on the Indonesia Stock Exchange). Jurnal Pendidikan Akuntansi & Keuangan, 5(2), 79-88. https://doi.org/10.17509/jpak.v5i2.15406

Hughes, H., & Woldekidan, B. (1994). The emergence of the middle class in ASEAN countries. ASEAN Economic Bulletin, 139-149. http://www.jstor.org/stable/25770536

Ifada, L. M., & Kusumadewi, N. (2014). Effect of net income, operational cash flow, investment opportunity set and firm size on cash dividends. Jurnal Dinamika Akuntansi, 6(2), 177-190. https://journal.unnes.ac.id/nju/index.php/jda/article/view/3256

Jabbouri, I. (2016). Determinants of corporate dividend policy in emerging markets: Evidence from MENA stock markets. Research in International Business and Finance, 37, 283-298. https://doi.org/10.1016/j.ribaf.2016.01.018

Jannah, W., Juanda, A., & Prasetyo, A. (2019). The influence of funding decisions and dividend policy on firm value with earnings quality as a moderating variable. Jurnal Akademi Akuntansi, 2(1). https://doi.org/10.22219/jaa.v2i1.8360

Kasmir. (2017). Financial statement analysis. Raja Gravindo Persada.

Kudeshia, C., & Kumar, A. (2017). Social eWOM: Does it affect the brand attitude and purchase intention of brands? Management Research Review, 40(3), 310-330. https://doi.org/10.1108/MRR-07-2015-0161

Luchs, M. G., & Kumar, M. (2017). "Yes, but this other one looks better/works better": How do consumers respond to trade-offs between sustainability and other valued attributes? Journal of Business Ethics, 140, 567-584. https://doi.org/10.1007/s10551-015-2695-0

Mamduh, M. H., & Abdul, H. (2016). Financial statement analysis. Yogyakarta: UPP STIM YKPN.

Murtaza, M., Iqbal, M. M., Ullah, Z., Rasheed, H., & Basit, A. (2018). An analytical review of dividend policy theories. Journal of Advanced Research in Business and Management Studies, 11(1), 62-76. https://www.akademiabaru.com/submit/index.php/arbms/article/view/1292

Nguyen, T. T. N., & Bui, P. K. (2019). Dividend policy and earnings quality in Vietnam. Journal of Asian Business and Economic Studies, 26(2), 301-312. https://doi.org/10.1108/JABES-07-2018-0047

Riyanto, B. (2013). Corporate spending fundamentals (4th ed.). BPFE.

Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86-136. https://doi.org/10.1177/1536867X0900900106

Ross, S. A., Westerfield, R. W., Jordan, B. D., Wong, R., & Wong, B. (2015). Essential of corporate finance Asia global edition. Singapore: McGraw-Hill Education.

Salim, R., Rafiq, S., Shafiei, S., & Yao, Y. (2019). Does urbanization increase pollutant emission and energy intensity? Evidence from some Asian developing economies. Applied Economics, 51(36), 4008-4024. https://doi.org/10.1080/00036846.2019.1588947

Suhardianto, N., & Kalanjati, D. S. (2014). Introduction to Indonesian accounting-adaptation. Salemba Empat, Jakarta.

Sukmawardini, D., & Ardiansari, A. (2018). The influence of institutional ownership, profitability, liquidity, dividend policy, debt policy on firm value. Management Analysis Journal, 7(2), 211-222. https://doi.org/10.15294/maj.v7i2.24878

Supardi, N. N. U. (2018). Effect of earning after tax (EAT) and operating cash flow on the dividend payout ratio (DPR) in companies registered on the Jakarta Islamic Index (JII): Study of PT. Bukit Asam Coal Mine (Persero) Tbk. UIN Sunan Gunung Djati Bandung. http://digilib.uinsgd.ac.id/id/eprint/9815

Tekin, H., & Polat, A. Y. (2021). Do market differences matter on dividend policy? Borsa Istanbul Review, 21(2), 197-208. https://doi.org/10.1016/j.bir.2020.10.009

Tijjani, B., & Sani, A. (2016). An empirical analysis of free cash flow and dividend policy in the Nigerian oil and gas sector. Research Journal of Finance and Accounting, 7(12). https://ssrn.com/abstract=2903494

Wahjudi, E. (2020). Factors affecting dividend policy in manufacturing companies in Indonesia Stock Exchange. Journal of Management Development, 39(1), 4-17. https://doi.org/10.1108/JMD-07-2018-0211

Wijaya, R. A., & Yamasitha, Y. (2020). Effect of profitability, ownership structure, collateralizable assets, free cash flow on dividend payout ratio with company size as control. Jurnal Ekonomi Dan Bisnis Dharma Andalas, 22(1), 157-171.

Wong, J., & Chan, S. (2003). China's outward direct investment: Expanding worldwide. China: An International Journal, 1(02), 273-301. https://doi.org/10.1142/S0219747203000177

Authors

Arie Akbar

School of Accounting, Bina Nusantara University, Jakarta, Indonesia

https://orcid.org/0000-0003-1327-3748

arie.akbar@binus.ac.id (Primary Contact)

Moch Doddy Ariefianto

School of Accounting, Master Accounting Bina Nusantara University, Jakarta, Indonesia

https://orcid.org/0009-0002-9956-9872

Akbar, A., & Ariefianto, M. D. (2023). The Role of Collateralizable Asset, Profitability and Operating Cash Flow on Dividend Policy: A Study on ASEAN Non-Financial Companies. Innovation Journal of Social Sciences and Economic Review, 5(1), 20–29. https://doi.org/10.36923/ijsser.v5i1.183

Download Citation

This work is licensed under a Creative Commons Attribution 4.0 International License.

IJSSER is committed to an open-access model for publishing, ensuring that all of its content is freely available under the terms of the Creative Commons Attribution License (CC BY) 4.0. This policy empowers researchers, academicians, and the general public to freely download, copy, print, and access the links to the full texts of published materials at no cost. Furthermore, authors are encouraged to read, distribute, and submit the published works to their institution's library and any other appropriate repositories.