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

Author

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  • Georgina Maria Tinungki

    (Department of Statistics, Faculty of Mathematics and Natural Sciences, Hasanuddin University, Makassar 90245, Indonesia)

  • Robiyanto Robiyanto

    (Faculty of Economics and Business, Satya Wacana Christian University, Salatiga 50711, Indonesia)

  • Powell Gian Hartono

    (Master of Management Program, Satya Wacana Christian University, Salatiga 50711, Indonesia)

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.

Suggested Citation

  • Georgina Maria Tinungki & Robiyanto Robiyanto & Powell Gian Hartono, 2022. "The Effect of COVID-19 Pandemic on Corporate Dividend Policy in Indonesia: The Static and Dynamic Panel Data Approaches," Economies, MDPI, vol. 10(1), pages 1-18, January.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:1:p:11-:d:715909
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    References listed on IDEAS

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    1. Li, Xiang, 2022. "The role of state-owned banks in crises: Evidence from German banks during COVID-19," IWH Discussion Papers 6/2022, Halle Institute for Economic Research (IWH), revised 2022.
    2. Kwangsoo Lim, 2016. "The Shift of a Dividend Policy and a Leverage Policy during the 2008 Financial Crisis," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 5(6), pages 09-14, October.
    3. Elif Akben-Selcuk, 2016. "Does Firm Age Affect Profitability? Evidence from Turkey," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(3), pages 1-9, September.
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    Cited by:

    1. Georgina Maria Tinungki & Powell Gian Hartono & Robiyanto Robiyanto & Agus Budi Hartono & Jakaria Jakaria & Lydia Rosintan Simanjuntak, 2022. "The COVID-19 Pandemic Impact on Corporate Dividend Policy of Sustainable and Responsible Investment in Indonesia: Static and Dynamic Panel Data Model Comparison," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    2. Abdullah AlGhazali & Khamis Hamed Al-Yahyaee & Richard Fairchild & Yilmaz Guney, 2024. "What do dividend changes reveal? Theory and evidence from a unique environment," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 499-552, February.

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