The Effect of COVID-19 Pandemic on Corporate Dividend Policy in Indonesia: The Static and Dynamic Panel Data Approaches

Georgina Maria Tinungki · Robiyanto Robiyanto · Powell Gian Hartono

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Corporate Finance and Governance Financial Analysis and Corporate Governance COVID-19 Pandemic Impacts

Abstract

This research examines the effect of the crisis due to the COVID-19 pandemic on dividend policy in Indonesia. The purposive sampling method was used to collect data from corporates listed on the IDX from 2014 to 2020 and analyzed using static and dynamic panel data approaches. The fixed-effect models (FEM) were selected for the static panel data regression. Meanwhile, the first difference-generalized method of moments (FD-GMM) and system-generalized method of moments (SYS-GMM) were used for determine the robustness of the estimated dynamic panel data. The results showed that the crisis due to the pandemic led to higher dividend distribution on SYS-GMM. Furthermore, companies maintained the dividend level as a positive signal for investors which lifted the sluggish trade condition in the capital market. Profitability and previous year dividends positively affect dividend policy robustly. Furthermore, the results showed that age affects dividend policy on FD-GMM. Financial leverage has a robust effect, and firm size has an effect on FD-GMM in different directions, while investment opportunity does not affect dividend policy. Statistically, the FEM selected that violates the best linear unbiased estimation was proven to form parameters that were not much different from the estimates produced by the dynamic model, both from the coefficient of influence direction and significance, and the omitted variable bias occurs as evidenced in the robust test with dynamic model was solved. This research is also used as a reference for considering investors’ investment decisions in the new normal condition. Therefore, dividend policy can be considered as a positive signal to investors with the ability to stock trading activities in the capital market.

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References

1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1995Another look at the instrumental variable estimation of error-components models 1984The Capital Structure Puzzle 2020Economic uncertainty before and during the COVID-19 pandemic 2017Measuring firm size in empirical corporate finance 2013DETERMINANTS OF FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA 2016Endogeneity in CEO power: A survey and experiment 2013Effect of Managerial Ownership, Financial Leverage, Profitability, Firm Size, and Investment Opportunity on Dividend Policy and Firm Value

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2023The Moderating Effect of the COVID-19 Pandemic on the Relation between Corporate Governance and Firm Performance 2022The COVID-19 Pandemic Impact on Corporate Dividend Policy of Sustainable and Responsible Investment in Indonesia: Static and Dynamic Panel Data Model Comparison 2023Sharia Economy, Islamic Financial Performance and Factors That Influence It—Evidence from Indonesia

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