Company managers should consider dividend distribution as a key factor in their financial strategy

Oct 13, 2025 by talynt.org 54 views

The Influence of Dividend Distribution on Abnormal Returns on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a significant impact on the country's economy. The IDX is a platform where companies can raise capital by issuing stocks and bonds, and where investors can buy and sell securities. One of the key factors that influence investor behavior on the IDX is dividend distribution. Dividend distribution is the payment of a portion of a company's earnings to its shareholders, and it is an important consideration for investors when making investment decisions.

The Importance of Dividend Distribution

Dividend distribution is a crucial aspect of a company's financial strategy, as it can have a significant impact on investor behavior and stock prices. When a company announces a good dividend distribution, investors tend to respond positively, which can increase stock prices and contribute to abnormal returns. Abnormal returns are the difference between the expected return and the actual return obtained, and they can reflect market reactions to information published related to dividends.

The Effect of Dividend Distribution on Abnormal Returns

This study aims to understand and analyze how dividend distribution can affect abnormal returns on the IDX. The methods used in data analysis include descriptive analysis and quantitative analysis. Among the quantitative techniques applied are simple linear regression tests, as well as the T test and coefficient of determination (R²). This study used secondary data collected from 2004 to 2008, with the help of SPSS version 12.00 for Windows. Data collection techniques are carried out through documentation studies, where researchers collect and study documents published by the IDX, as well as references from related scientific books and literature that can be accessed online.

Results

The results of this study show that dividend distribution has a significant influence on the abnormal return on the IDX. This can be proven through the T test results, which indicate a significant value of 0,000, which is smaller than 0.05. In addition, the analysis of the determinant coefficient (R²) shows the R Square value of 29.70%. This means that 29.70% of the abnormal return variation can be explained by the dividend distribution variable, while the remaining 70.30% is influenced by other factors that are not examined in this study.

In-Depth Analysis

Dividend distribution can be seen as one of the company's strategies to attract investors. When the company announces a good dividend distribution, investors generally will respond positively, which can increase stock prices. This contributes to the abnormal return, which is the difference between the expected return and the actual return obtained. This abnormal return can reflect market reactions to information published related to dividends.

On the IDX, this phenomenon is clearly seen when large companies announced dividends. Investors who previously considered investing tend to pay attention to companies that consistently pay dividends. This causes stock demand to increase, which in turn can encourage stock prices to rise and produce positive abnormal returns.

However, keep in mind that although dividend distribution has a positive influence, not all investors react in the same way. Some may consider the growth of stock capitalization rather than dividend returns, which make investor behavior a key factor in understanding market dynamics.

Conclusion

Overall, this study shows that dividend distribution has a significant effect on the abnormal return on the IDX. This finding is important for investors and company managers to understand how decisions about dividend distribution can affect investor perceptions and stock prices in the market. Therefore, wise dividend management strategies can increase company value in the eyes of investors and indirectly contribute to better market performance.

Recommendations

Based on the findings of this study, the following recommendations can be made:

Company managers should consider dividend distribution as a key factor in their financial strategy. By paying consistent dividends, companies can attract investors and increase stock prices.
Investors should consider dividend distribution when making investment decisions. By paying attention to dividend distribution, investors can make informed decisions about which companies to invest in.
The IDX should consider implementing policies that promote dividend distribution. By promoting dividend distribution, the IDX can create a more favorable environment for investors and companies.

Limitations

This study has several limitations that should be noted. Firstly, the study only used secondary data collected from 2004 to 2008, which may not be representative of the current market situation. Secondly, the study only examined the effect of dividend distribution on abnormal returns, and did not consider other factors that may influence investor behavior. Finally, the study only used a simple linear regression model, which may not capture the complex relationships between variables.

Future Research Directions

Based on the findings of this study, several future research directions can be suggested:

Examining the effect of dividend distribution on other financial metrics. Future studies can examine the effect of dividend distribution on other financial metrics, such as stock prices, earnings per share, and return on equity.
Investigating the impact of dividend distribution on investor behavior. Future studies can investigate the impact of dividend distribution on investor behavior, including investor attitudes, preferences, and decision-making processes.
Analyzing the effect of dividend distribution on company performance. Future studies can analyze the effect of dividend distribution on company performance, including company growth, profitability, and sustainability.

Conclusion

In conclusion, this study shows that dividend distribution has a significant effect on the abnormal return on the IDX. This finding is important for investors and company managers to understand how decisions about dividend distribution can affect investor perceptions and stock prices in the market. Therefore, wise dividend management strategies can increase company value in the eyes of investors and indirectly contribute to better market performance.
Frequently Asked Questions (FAQs) about the Influence of Dividend Distribution on Abnormal Returns on the Indonesia Stock Exchange

Q: What is dividend distribution and how does it affect abnormal returns?

A: Dividend distribution is the payment of a portion of a company's earnings to its shareholders. When a company announces a good dividend distribution, investors tend to respond positively, which can increase stock prices and contribute to abnormal returns. Abnormal returns are the difference between the expected return and the actual return obtained, and they can reflect market reactions to information published related to dividends.

Q: What is the significance of dividend distribution in the Indonesia Stock Exchange?

A: Dividend distribution is a crucial aspect of a company's financial strategy, as it can have a significant impact on investor behavior and stock prices. When a company announces a good dividend distribution, investors tend to respond positively, which can increase stock prices and contribute to abnormal returns.

Q: How does dividend distribution affect investor behavior?

A: Dividend distribution can attract investors who are looking for stable and consistent returns. When a company announces a good dividend distribution, investors tend to pay attention to the company and may consider investing in it. This can increase stock demand and encourage stock prices to rise.

Q: What are the benefits of dividend distribution for companies?

A: Dividend distribution can have several benefits for companies, including:

Attracting investors who are looking for stable and consistent returns
Increasing stock prices and contributing to abnormal returns
Improving company reputation and credibility
Encouraging long-term investment and loyalty from shareholders

Q: What are the limitations of this study?

A: This study has several limitations, including:

The study only used secondary data collected from 2004 to 2008, which may not be representative of the current market situation
The study only examined the effect of dividend distribution on abnormal returns, and did not consider other factors that may influence investor behavior
The study only used a simple linear regression model, which may not capture the complex relationships between variables

Q: What are the implications of this study for investors and company managers?

A: The findings of this study have several implications for investors and company managers, including:

Investors should consider dividend distribution when making investment decisions
Company managers should consider dividend distribution as a key factor in their financial strategy
The Indonesia Stock Exchange should consider implementing policies that promote dividend distribution

Q: What are the future research directions for this study?

A: Several future research directions can be suggested, including:

Examining the effect of dividend distribution on other financial metrics, such as stock prices, earnings per share, and return on equity
Investigating the impact of dividend distribution on investor behavior, including investor attitudes, preferences, and decision-making processes
Analyzing the effect of dividend distribution on company performance, including company growth, profitability, and sustainability

Q: What are the practical implications of this study for the Indonesia Stock Exchange?

A: The findings of this study have several practical implications for the Indonesia Stock Exchange, including:

Implementing policies that promote dividend distribution
Encouraging companies to consider dividend distribution as a key factor in their financial strategy
Providing education and training to investors and company managers about the importance of dividend distribution

Q: What are the limitations of this study for the Indonesia Stock Exchange?

A: This study has several limitations for the Indonesia Stock Exchange, including:

The study only used secondary data collected from 2004 to 2008, which may not be representative of the current market situation
The study only examined the effect of dividend distribution on abnormal returns, and did not consider other factors that may influence investor behavior
The study only used a simple linear regression model, which may not capture the complex relationships between variables

Q: What are the future research directions for the Indonesia Stock Exchange?

A: Several future research directions can be suggested, including:

Examining the effect of dividend distribution on other financial metrics, such as stock prices, earnings per share, and return on equity
Investigating the impact of dividend distribution on investor behavior, including investor attitudes, preferences, and decision-making processes
Analyzing the effect of dividend distribution on company performance, including company growth, profitability, and sustainability