Cost Structure and Payout Policy in Indonesia 2011-2015

DOI

10.2991/icbmr-18.2019.11How to use a DOI?

Keywords

payout policy, cost structure, operating leverage, dividend, emerging markets.

Abstract

This study aims to examine the impact of cost structure on payout policy within Indonesian non-financial firms. Previously, there has not been much prior research regarding cost structure and payout policy in emerging markets, especially Indonesia. Most Indonesian firms still prefer to distribute dividends over repurchases. Cost structure can be defined as the portion of the firms’ fixed and variable costs. By using logistic panel regression method, the results show that Indonesian non-financial firms’ cost structure plays a significant role in payout policy, specifically dividend payout. When the cost structure decrease, firms become more flexible in changing their profits as the sales change. The higher values of cost structure mean the more inflexible the firms become, these firms tend to have a high proportion of fixed costs in their operating costs. This study reaches the understanding that firms with a high-cost structure usually compensate less in dividends and repurchases. Indonesian non-financial firms, which distributes payout, have a lower cost structure, higher retained earnings, higher cash, and more variable operating income. Based on the conducted study, it is more rational for Indonesian non-financial firms to administer payout on dividend compared to repurchasing. Although the trend of repurchasing shares has recently escalated in emerging countries, especially Indonesia, the majority of Indonesian non-financial firms still have the tendency to spend money on dividend instead of repurchases due to unclear repurchases regulation and several limitations.

Copyright

© 2019, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Elizabeth Lesmana Pualam
AU  - Sigit Sulistiyo Wibowo
PY  - 2019/03
DA  - 2019/03
TI  - Cost Structure and Payout Policy in Indonesia 2011-2015
BT  - Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)
PB  - Atlantis Press
SP  - 60
EP  - 65
SN  - 2352-5428
UR  - https://doi.org/10.2991/icbmr-18.2019.11
DO  - 10.2991/icbmr-18.2019.11
ID  - Pualam2019/03
ER  -