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Profitability and Firm Value: Does Dividend Policy Matter for Indonesian Sustainable and Responsible Investment (SRI)-KEHATI Listed Firms?

Author

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  • Akhmadi Akhmadi

    (Department of Management, Faculty of Economics and Business, University of Sultan Ageng Tirtayasa, Jalan Raya Palka, Km. 3, Sindangsari, Kec. Pabuaran, Kabupaten Serang 42163, Indonesia)

  • Yeni Januarsi

    (Department of Accounting, Faculty of Economics and Business, University of Sultan Ageng Tirtayasa, Jalan Raya Palka, Km. 3, Sindangsari, Kec. Pabuaran, Kabupaten Serang 42163, Indonesia
    Graduate School of Economics, Kyushu University, Fukuoka 819-0395, Japan)

Abstract

This study investigates the potential factors explaining the inconsistent relationship between profitability and firm value. Specifically, it examines whether dividend policy contributes to the profitability–firm value relationship and determines the form of the moderating variables. We use a unique data set from the Indonesian capital market, with sustainable and responsible investment (SRI)-KEHATI-listed firms from 2010 to 2019. Adopting hierarchy moderating analysis, the results show a positive direct relationship between profitability and firm value. Moreover, the profitability–firm value relationship becomes stronger with a higher dividend policy ratio. We complement this with evidence that the dividend policy plays a role as a pure moderator in more sustainable and responsible firms. A sensitivity battery analysis and the endogeneity concern show consistent results as the baseline model, implying that the model is robust to different conditions. Additional tests revealed that the dividend policy is more prominent in low-leverage enterprises, low-intensity advertising firms, and during the financial service authority’s post-dividend policy regulation phase. The implication of our study is that corporate policy and country regulation play a role as a potential competitive strategy to increase shareholder value for SRI-KEHATI-listed firms.

Suggested Citation

  • Akhmadi Akhmadi & Yeni Januarsi, 2021. "Profitability and Firm Value: Does Dividend Policy Matter for Indonesian Sustainable and Responsible Investment (SRI)-KEHATI Listed Firms?," Economies, MDPI, vol. 9(4), pages 1-23, November.
    • Handle: RePEc:gam:jecomi:v:9:y:2021:i:4:p:163-:d:669672
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    References listed on IDEAS

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    2. Anggita Langgeng WIJAYA & Ima Widha RATNASARI, 2023. "The Effect of the Audit Committee on the Firm Value of State-Owned Enterprises in Indonesia: The Mediation Role of Financial Performance," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(6), pages 60-72, June.
    3. 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.
    4. Liudmila I. Khoruzhy & Valery I. Khoruzhy & Bogdan S. Vasyakin & Wenhao Shen, 2022. "Program-Targeted Approach to Managing Financial Risks of Sustainable Development Based on Corporate Social Responsibility in the Decade of Action," Risks, MDPI, vol. 10(3), pages 1-20, March.

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