Analyzing the Impact of Foreign Board and Foreign Ownership on Dividend Policy: Evidence from Indonesia
DOI:
https://doi.org/10.24256/kharaj.v7i4.8132Keywords:
Data Panel; Dividends; Foreign Commissioners; Foreign Directors; Foreign Ownership.Abstract
Dividend policy is crucial for the company because there are investors who are entitled to and await cash dividends distributed by the company. However, on the other hand, management believes that the company's profits are better retained for the purpose of future investments. Indonesia adopts a two-tier system for board members in companies by separating the supervisory function of the board from the executive function of the board. The purposive sampling technique was used in the selection of research samples, resulting in 543 companies during the years 2018-2021. The results of the panel data regression using the Lagrange Multiplier test obtained REM as the best model. with the results of Foreign Directors having a significant and positive impact on dividends, as well as the results of Foreign Commissioners having a significant and positive impact on dividends, then foreign ownership has a negative and significant impact on dividends
References
Benameur, K., Hassanein, A., Mostafa, M. M., Elmaghrabi, M., & Tharwat, H. (2025). A decade of sustainable finance scholarly research: performance analysis, science mapping and future pathways. Journal of Financial Reporting and Accounting, October. https://doi.org/10.1108/JFRA-10-2024-0722
Boshnak, H. A. (2023). The impact of board composition and ownership structure on dividend payout policy: evidence from Saudi Arabia. International Journal of Emerging Markets, 18(9), 3178–3200. https://doi.org/10.1108/IJOEM-05-2021-0791
Cao, L., Du, Y., & Hansen, J. Ø. (2017). Foreign institutional investors and dividend policy: Evidence from China. International Business Review, 26(5), 816–827. https://doi.org/10.1016/j.ibusrev.2017.02.001
Choi, H. M., Sul, W., & Min, S. K. (2012). Foreign board membership and firm value in Korea. Management Decision, 50(2), 207–233. https://doi.org/10.1108/00251741211203533
Elsayed, N., & Hassanein, A. (2024). Is voluntary risk disclosure informative? The role of UK firm-level governance. International Journal of Productivity and Performance Management, 73(6), 1826–1855. https://doi.org/10.1108/IJPPM-09-2022-0486
Eluyela, D. F., Adetula, D. T., Obasaju, O. B., Ozordi, E., Akintimehin, O., & Popoola, O. (2019). Foreign directors, indigenous directors and dividend payout structure in Nigerian deposit money banks. Banks and Bank Systems, 14(2), 181–189. https://doi.org/10.21511/bbs.14(2).2019.16
Eluyela, D. F., Dahunsi, O., Tolase, O. A., Okere, W., Ogabi, M., & Kafidipe, A. (2019). Impact of gender dichotomy on dividend payout policy in listed Nigerian financial services firm. Cogent Business and Management, 6(1). https://doi.org/10.1080/23311975.2019.1687270
Easterbrook, F. H. (1984). Two Agency-Cost Explanations of Dividends. The American Economic Review, 74(4), 650–659. http://www.jstor.org/stable/1805130
Fama, E. F., & French, K. R. (1998). Taxes, Financing Decisions, and Firm Value. In Journal of Finance (Vol. 53, Issue 3).
Farag, H., & Mallin, C. (2017). Board diversity and financial fragility: Evidence from European banks. International Review of Financial Analysis, 49, 98–112. https://doi.org/10.1016/j.irfa.2016.12.002
Fogel, K. S., Lee, K. K., Lee, W. Y., & Palmberg, J. (2013). Foreign direct investors as change agents: The Swedish firm experience. Corporate Governance: An International Review, 21(6), 516–534. https://doi.org/10.1111/corg.12035
Frezha, M., Arnanda, R., & Wardoyo, D. U. (2025). The Effect of Dividend Policy , Profitability , and Reporting Timeliness on Share Price Fluctuations of Listed Primary Consumer Goods Sector Companies on The Idx 2019-2023 Period. 1057–1066.
García-Meca, E., López-Iturriaga, F. J., & Santana-Martín, D. J. (2022). Board gender diversity and dividend payout: The critical mass and the family ties effect. International Review of Financial Analysis, 79. https://doi.org/10.1016/j.irfa.2021.101973
Giannetti, M., Liao, G., & Yu, X. (2015). The Brain Gain of Corporate Boards: Evidence from China. Journal of Finance, 70(4), 1629–1682. https://doi.org/10.1111/jofi.12198
Gyapong, E., Ahmed, A., Ntim, C. G., & Nadeem, M. (2021). Board gender diversity and dividend policy in Australian listed firms: the effect of ownership concentration. Asia Pacific Journal of Management, 38(2), 603–643. https://doi.org/10.1007/s10490-019-09672-2
Hasan, M. B., Wahid, A. N. M., Amin, M. R., & Hossain, M. D. (2023). Dynamics between ownership structure and dividend policy: evidence from Bangladesh. International Journal of Emerging Markets, 18(3), 588–606. https://doi.org/10.1108/IJOEM-06-2020-0711
Iliev, P., & Roth, L. (2018). Learning from directors’ foreign board experiences. Journal of Corporate Finance, 51(2017), 1–19. https://doi.org/10.1016/j.jcorpfin.2018.04.004
Jarallah, S., & Ullah, W. (2014). Evolving corporate governance and the dividends behaviour regime in Japan. International Review of Economics, 61(3), 279–303. https://doi.org/10.1007/s12232-014-0195-7
Jeon, J. Q., Lee, C., & Moffett, C. M. (2011). Effects of foreign ownership on payout policy: Evidence from the Korean market. Journal of Financial Markets, 14(2), 344–375. https://doi.org/10.1016/j.finmar.2010.08.001
Jiraporn, P. (n.d.). Volume 39 , Issue 4 Does board gender diversity influence dividend policy ? Evidence from France. 39(4), 2942–2954.
Lee, E. J., Kim, S., & Jang, Y. (2022). Foreign investment horizons, corporate governance and payout policy. Journal of Derivatives and Quantitative Studies: 선물연구, 30(3), 219–244. https://doi.org/10.1108/jdqs-02-2022-0004
Lee, J. H. (2022). Earnings quality, foreign investor and dividends. Journal of Derivatives and Quantitative Studies, 30(1), 58–72. https://doi.org/10.1108/JDQS-07-2021-0018
Masulis, R. W., Wang, C., & Xie, F. (2012). Globalizing the boardroom-The effects of foreign directors on corporate governance and firm performance. Journal of Accounting and Economics, 53(3), 527–554. https://doi.org/10.1016/j.jacceco.2011.12.003
Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74–95. https://doi.org/10.1177/0974686217701467
Pratiwi, H. N. (2019). Pengaruh Free Cash Flow Dan Struktur Kempemilikan Terhadap Dividend Pay Out Ratio. Jurnal Dinamika Akuntansi, 4(2), 67–91.
Pucheta-Martínez, M. C., & López-Zamora, B. (2017). How foreign and institutional directorship affects corporate dividend policy. Investment Analysts Journal, 46(1), 44–60. https://doi.org/10.1080/10293523.2016.1253136
Purba, S. D., Risfandy, T., Muizzuddin, M., & Nugroho, M. R. (2022). Foreign institutional investors and dividend policy in Indonesia. Journal of Asset Management, 23(3), 235–245. https://doi.org/10.1057/s41260-022-00259-z
Putra, F., & Setiawan, D. (2025). Diversity of the board, nomination committee and earnings management in the two-tier system. Journal of Derivatives and Quantitative Studies, October. https://doi.org/10.1108/JDQS-08-2024-0037
Putra, F., Setiawan, D., Hartoko, S., & Arifin, T. (2024). Board Remuneration, Remuneration Committee, and Earnings Management in a Two-Tier System for Company Sustainable Development. Business Strategy and Development, 7(4), 1–23. https://doi.org/10.1002/bsd2.70046
Read, C. (2014). Jensen and Meckling. The Corporate Financiers, 3, 305–360. https://doi.org/10.1057/9781137341280.0038
Setiawan, D., Aryani, A., Yuniarti, S., & Khresna Brahmana, R. (n.d.). Does Ownership Structure Affect Dividend Decisions? Evidence from Indonesia’s Banking Industry. INTERNATIONAL JOURNAL OF BUSINESS, 24(3), 2019.
Setiawan, D., Brahmana, R. K., Asrihapsari, A., & Maisaroh, S. (2021). Does a foreign board improve corporate social responsibility? Sustainability (Switzerland), 13(20), 1–17. https://doi.org/10.3390/su132011473
Setiawan, D., & Phua, L. K. (2013). Corporate governance and dividend policy in Indonesia. Business Strategy Series, 14(5–6), 135–143. https://doi.org/10.1108/BSS-01-2013-0003
Tao, Q., Wei, K. C. J., Xiang, X., & Yi, B. (2022). Board directors’ foreign experience and firm dividend payouts. Journal of Corporate Finance, 75. https://doi.org/10.1016/j.jcorpfin.2022.102237
Tran, Q. T. (2020). Corruption, agency costs and dividend policy: International evidence. Quarterly Review of Economics and Finance, 76, 325–334. https://doi.org/10.1016/j.qref.2019.09.010
Triani, N., & Tarmidi, D. (2019). Firm Value : Impact of Investment Decisions, Funding Decisions and Dividend Policies. International Jurnal Of Academic Research in Accounting, Finance, and Management Sciences, 9(2), 158–163. https://doi.org/10.6007/IJARAFMS/v9-i2/6107
Yarram, S. R., & Dollery, B. (2015). Corporate governance and financial policies: Influence of board characteristics on the dividend policy of Australian firms. Managerial Finance, 41(3), 267–285. https://doi.org/10.1108/MF-03-2014-0086
Yousef, I., Zighan, S., Hussainey, K., & Hassanian, A. (2025). The role of foreign directors in shaping corporate dividend policies in emerging markets: an empirical application of modified Kanter’s framework. Journal of Applied Accounting Research, October. https://doi.org/10.1108/JAAR-02-2024-0064
Zakaria, A., Nindito, M., Nasution, H., Khairunnisa, H., & Siregar, M. E. S. (2021). Does Board Diversity Affect Company Value? Jurnal Keuangan Dan Perbankan, 25(2). https://doi.org/10.26905/jkdp.v25i2.5516
Downloads
Published
How to Cite
Issue
Section
Citation Check
License
Copyright (c) 2025 Rafie Akbar Sumarno, Muhammad Husni, Anto Andreawan
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. In line with the license, authors are allowed to share and adapt the material. In addition, the material must be given appropriate credit, provided with a link to the license, and indicated if changes were made. If authors remix, transform or build upon the material, authors must distribute their contributions under the same license as the original.
