Ownership Structure, Board Composition and Dividend Payout Policy: Evidence In

Indonesia

Supanji Setyawan
Universitas Sebelas Maret
supanji@student.uns.ac.id

Doddy Setiawan
Universitas Sebelas Maret
doddy.setiawan@staff.uns.ac.id

Abstract
Purpose: This study examines the influence of ownership structure board and composition
variables on dividend payout policy in Indonesian firms. In particular, it aims to determine
the effect of board size, independence and meeting frequency, and state, institutional,
managerial, family, and foreign ownership on both the propensity to pay dividends and
dividend per share for Indonesia listed non-financial firms over the period 2016–2020.

Design/methodology/approach: This study captures dividend policy with two measures,

propensity to pay dividends and dividend per share, and employs a range of regression
methods (logistic, probit, ordinary least squares (OLS) and random effects regressions) along
with a two-stage least squares (2SLS) model for robustness to account for heteroscedasticity,
serial correlation and endogeneity issues. The data set is a large panel of Indonesian non-
financial firms over the period 2016 to 2020.

Keywords: Ownership structure, Board composition, Dividend policy, Indonesia Stock

Exchange

Introduction:
The ownership structure and Board composition are essential drivers of managers’ incentives
and hence firm efficiency (Jensen and Meckling, 1976). Dividend policy, a key strand of
corporate strategy, remains one of the maximum intensively researched and contentious fields
of company finance. A dividend is the unit of earnings paid to shareholders as compensation
for his or her chance funding. As a key issue of remuneration along with potential capital
profits, shareholders maximize their wealth by means of maximizing total returns. but, there
may be a key exchange-off for firms trying to each distribute income as dividends and retain
budget to help long-time period boom. therefore, dividend policy is a contentious balancing
act for management to pursue shareholders’ quality interests to retain their accept as true with
even as ensuring funding profits and firm growht.

While there are numerous dividend coverage studies for emerging market countries
(Abdelsalam et al., 2008; Al-Najjar and Belghitar, 2014; Benjamin and Zain, 2015; Yarram
and Dollery, 2015; Benjamin and Zain, 2015; Elmagrhi et al., 2017; Mehdi et al., 2017;
Bataineh, 2020; Suwaidan and Khalaf, 2020; Hasan et al., 2021) there has been less emphasis
at the have an effect on of right governance on dividend coverage to cope with capacity
employer troubles. there's a paucity of research particularly on the impact on dividend
coverage of board composition and ownership. further, dividend coverage in Indonesian
firms may additionally well range from that determined in developed nations.

Company dividend policies exert a vital effect on company percentage charges and therefore
marketplace price (Bernstein, 1998; Baker and Powell, 1999; Sarwar, 2013). There is awell-
developed global literature on dividend coverage motive force (Glen et al., 1995; La Porta et
al., 2000; Thanatawee, 2013; Berezinets et al., 2017; Adjaoud and Hermassi, 2017; Bataineh,
2020; Suwaidan and Khalaf, 2020; Hasan et al., 2021). however, most research attention on
advanced countries characterized through well-regulated financial markets and broadly
dispersed ownership, whilst the literature for rising nations is still developing. The emerging
marketplace literature lacks intensity, and a few key variations in dividend policy drivers
exist throughout nations (Lace et al., 2013; Al-Najjar and Kilincarslan, 2019; Bataineh, 2020;
Hasan et al., 2021).

The corporate board exists to approve the employer’s strategic desires, plans, and policies,
and to direct its company affairs. The board is commonly composed of internal directors at its
core, whilst extra outside administrators are executives from different firms (Gitman and
Zutter, 2015). The composition introduces an detail of each independence and diversity. The
board determines each whether to pay dividends and the level where dividends are paid. This
choice is stimulated by way of the firm’s ownership structure, as a governance manipulate
mechanism, which determines how ownership is split among institutional and retail traders,
managers, governments, and own family, and thus how ownership can be either concentrated
or dispersed.

The extant literature lacks consensus on an appropriate effect of the ownership structure and
board composition on firms’ dividend guidelines. traders require a go back that is regular
with the investment danger taken, and dividend coverage aims to maximize their wealth with
the aid of balancing the flow of allotted and retained profits. Given the especially
underdeveloped literature on rising market dividend coverage, this study aims to look at the
impact of both ownership structure and board composition variables on corporate dividend
payout policy in indonesia listed companies over the length 2015–2020, thereby making the
following contributions: First, it offers evidence on the effect on dividend payout policy of
the ownership structure and board composition in an emerging market setting in which
corporate governance and company law are tremendously susceptible whilst compared to
developed markets. And second, firms in Indonesia offer an thrilling example of a key
emerging marketplace, as they're related to business firms and managed through founding
family individuals, accordingly giving extensive decision-making strength to controlling
shareholders. Third, the have a look at outcomes have the funds for insights for investors and
others to facilitate higher-knowledgeable funding selections. The research questions tackled
inside the paper are :
(1) What is the relationship between the firm’s propensity to pay dividends and dividend
per share and its ownership structure?
(2) What is the relationship between the firm’s propensity to pay dividends and dividend
per share and the composition of the board of directors?

Literature review and hypothesis development

There may be a longtime theoretical literature in search of to provide an explanation for
dividend coverage, focusing largely on evolved as opposed to growing countries, and
employing enterprise, signalling, outcome and substitute theories. At its middle is the
dividend puzzle wherein (higher) dividend paying companies are rewarded with better
valuations even though traders should be indifferent among such firms and those paying no or
decrease dividends.

There's an corporation struggle among managers and shareholders within the presence of
information asymmetry (Jensen and Meckling, 1976), whereby the previous may also engage
in actions which are dangerous to the latter and therefore firm cost. Dividends may therefore
be employed as a mechanism to minimize the unfastened cash available to control to pursue
their pastimes by using making terrible investment choices (Rozeff, 1982; Easterbrook,
1984), and thereby dividends reduce the organization costs from management–shareholder
interest misalignment (Zainudin et al., 2018).

Agency conflict type I takes place in extensively dispersed companies (Jensen and Meckling,
1976), it is argued, because there is an statistics asymmetry among managers and
shareholders. each parties work in their own best pursuits. Managers make choices in their
very own high-quality hobbies on the price of shareholders. Dispersed shareholders do no
longer maintain sufficient stocks to take action to screen their managers, because the prices of
doing so are too expensive. massive shareholders keep huge numbers of stocks to undergo the
value of tracking and to earn their returns on investment (Shleifer and Vishny, 1986). big
shareholders will take strategic movement to beautify companies’ values. as a result, large
shareholders have to have a fantastic effect on companies’ values.

Agency conflict type II is broadly found in insider-dominated firms (Claessens and

Yurtoglu,2013). whilst shareholders have a majority manage of companies, they have an
opportunity to make selections of their personal favor (Shleifer and Vishny, 1997).
Controlling shareholders make decisions to maintain assets inside companies. In Asia,
controlling shareholders take advantage of pyramidal systems or enterprise groupings to
preserve sources beneath their manipulate, main to tunneling (Johnson et al., 2000). Such
sorts of expropriation disadvantage minority shareholders (Xu’nan, 2011). there may be some
empirical evidence from China that controlling shareholders use dividend payouts for
tunneling (Chen et al., 2009; Lv et al., 2012). moreover, expropriation becomes worse in
environments with vulnerable corporate governance (la Porta et al., 1998, 2000).

A number of extant studies check out how dividend policy is suffering from board and
ownership structures throughout a number developed and rising countries. Focussing on
advanced capital markets, Borokhovich et al. (2005) discover a negative relationship between
US company board independence and dividend payouts, at the same time as Gill and
Obradovich (2012) take a look at a positive association between US firm board size and
leader government officer (CEO) duality and dividends. Al-Najjar and Kilincarslan (2016)
have a look at Turkish companies and look at a lower propensity to pay dividends inside the
presence of kingdom and overseas ownership, whilst home economic institution ownership,
circle of relatives ownership and the lifestyles of minority shareholders have no impact.
however, dividend yields and payout ratios are negatively associated with those ownership
factors. Al-Najjar and Belghitar (2014) study company compliance with excellent governance
exercise and locate that institutional ownership positively impacts coins dividend payments,
whilst director independence weakly impacts coins dividends. but, Elmagrhi et al. (2017)
examine that neither board independence nor CEO position duality impact the extent of
dividends in uk small and medium-sized establishments (SMEs), at the same time as Yarram
and Dollery (2015) find a wonderful dating between dividend payout and the degree of board
independence and company length in Australian firms.

In terms of rising capital markets, Abdelsalam et al. (2008) observe that greater institutional
ownership ends in each a more chance of paying dividends and an stronger payout ratio in
Egyptian firms, even though they locate no relation among dividends and board composition.
in addition, Tahir et al. (2020) locate no relation between dividend payout and board variety
in Malaysian firms, a fine courting with both board length and profitability, and a negative
relation with company leverage. Mehdi et al. (2017) find that company dividends upward
push with the degree of institutional ownership in East Asian and Gulf Cooperation Council
international locations. In assessment, Juhmani (2020) observes dividends to be negatively
related to the degree of board independence, positively related to board length, and unrelated
to board assembly frequency, institutional and managerial ownership, and blockholder
ownership in Bahraini firms. Suwaidan and Khalaf (2020) determine that dividends are
positively associated with institutional ownership, duality, board length and profits in keeping
with proportion in Jordanian firms. furthermore, Ahmad et al. (2019) study Pakistani firms
and locate that better profitability firms pay extra dividends as a mechanism for signalling
firm potentialities to cope with business enterprise issues.

Roy (2015) studies Indian firms and unearths that board length, director independence, and
the board percentage of non-executive directors undoubtedly impact dividend payout, at the
same time as company liquidity and increase have a effective impact. Nguyen et al. (2021)
examine Vietnamese companies and show that role duality has a poor impact on dividends,
while firm profitability, leverage, length, and funding possibilities definitely have an effect
on dividends. Hasan et al. (2021) study Bangladeshi firms and display that both public and
circle of relatives ownership definitely have an effect on dividends, at the same time as
institutional and authorities ownership have a terrible impact. similarly, profitability,
leverage, the charge-income ratio, firm age and the global monetary disaster undoubtedly
affected dividends.

In relation to Saudi Arabia, Al-Qahtani and Ajina (2017) locate that management ownership
will increase dividend payouts while family ownership and the quantity of institutional
ownership reduce payouts, the latter because of the extra powerful tracking of the control.
furthermore, Soliman (2013) reveals that each the likelihood of paying dividends and the
payout ratio are definitely related to the diploma of institutional ownership, board length and
company overall performance in Indonesian companies, even though no courting is observed
when it comes to the degree of independence, function duality or the diploma of managerial
blockholder ownership.

This observe aims to research the impact of each board characteristics and ownership shape
variables at the dividend policy of Indonesia listed firms. It improves upon the examine of
Soliman (2013) in diverse approaches. First, it augments the developing body of rising
market studies on company governance, the ownership shape and dividend coverage with
updated information spanning the period 2015–2020. second, it investigates the effect on
dividend coverage of in addition firm-degree governance variables which includes board
meeting frequency, new ownership shape variables (country, circle of relatives and foreign
ownership), and further firm-precise characteristics to address the conflicting findings of the
prior research. in the end, it gives new evidence and dialogue at the significance and efficacy
of company governance mechanisms and ownership structure that affect Indonesia company
dividend policy.

This phase draws from the big body of the literature addressing the determinants of dividend
coverage, focussing specifically on company governance elements (board size and
independence, and board meeting frequency) and possession shape factors (state,
institutional, managerial and own family ownership) to increase hypotheses in a Indonesia.

Board Composition

a. Board size.

The function played by way of board size in lowering business enterprise conflicts varies
with the aid of theoretical standpoint. company principle shows that large boards permit loose
using, low company overall performance, ineffective decision-making and weak monitoring
(Jensen and Meckling, 1976; Fama, 1980), as a consequence main to a demand for better
dividends to compensate traders. In contrast, aid dependence theory sees larger boards as
providing extra outside resources and know-how along side extra energetic capabilities to the
agency (Dalton et al., 1998). Given the extra control specialization and more suitable
monitoring of bigger forums (Klein, 2002), decreased dividends are required for tracking
functions. similarly, signalling concept indicates that larger boards offer a superb market
sign, and thus less demand for better dividends to mild corporation prices. In fact, board
length in emerging countries is commonly incredibly small, thereby reducing agency troubles
and the demand for excessive dividend payouts.

Maximum empirical studies assist better dividend payouts as board length increases (Xie et
al., 2003; Abdelsalam et al., 2008; Soliman, 2013; Roy, 2015; Benjamin and Zain, 2015;
Mehdi et al., 2017; Juhmani, 2020; Suwaidan and Khalaf, 2020), whilst a minority find a
negative relation (Khan, 2006; Roy, 2015). in addition research find no such relation between
dividend payout and board size (Cheng, 2008; Ajanthan, 2013). From an enterprise idea
perspective, smaller forums may produce extra organisation charges and accordingly require
better dividend payouts for investors. consequently, the following hypotheses are proposed:

H1a. There is a negative relationship between board size and the propensity to pay
dividends.
H1b. There is a negative relationship between board size and dividend per share.

b. Board independence.

Independent directors are key to successful in-residence manage and tracking (Gregory,
2000), thereby safeguarding the reliability of financial assertion disclosures. wherein a
company’s management control structures are negative, investors depend upon dividends for
monitoring control (Rozeff, 1982), and external directors have extra ability to safeguard
shareholder wealth in terms of the payout (Hu and Kumar, 2004; Al-Najjar and Hussainey,
2009; Ntim, 2011). but, external directors have less understanding and information
concerning the company and won't make such good selections as the internal (government)
administrators, main to a terrible affiliation between independence and performance, and in
flip dividend payout. los angeles Porta et al. (2000) argue that employer costs will fall in a
nicely-ruled firm, diminishing the want for dividends in companies with extra impartial
boards, consistent with alternative concept.

Several research find a tremendous association between dividend payout and board
independence (Abdelsalam et al., 2008; Roy, 2015), others study a bad relation (Al-Najjar
and Hussainey, 2009; Roy, 2015; Shehu, 2015), and some research find no courting
(Benjamin and Zain, 2015; Elmagrhi et al., 2017; Juhmani, 2020; Suwaidan and Khalaf,
2020). Drawing on alternative theory, a poor courting is expected, and the subsequent
hypotheses are proposed:

H2a. There is a negative relationship between the degree of board independence and
the propensity to pay dividends.

H2b. There is a negative relationship between the degree of board independence and
dividend per share.

c. Board meetings.

More board assembly frequency need to bring extended board tracking, with infrequent
conferences leading to much less tracking and scrutiny of management plans, motivations
and strategic troubles together with dividend policy (Grinstein and Michaely, 2005). la. Porta
et al. (2000) draw on alternative principle, suggesting that board assembly frequency and
dividends may be substituted for each other to cope with agency issues, so greater frequent
conferences cause lower dividends. Sawicki (2009) counters with a signalling argument that
higher dividend payouts make amends for the poor governance associated with common
board conferences, even as final results theory shows a advantageous relation as the dividend
price results from powerful governance.

The restrained empirical literature has a tendency to find a negative relationship (Benjamin
and Zain, 2015; Elmagrhi et al., 2017), whilst Mehdi et al. (2017) discover a wonderful
relation in East Asian and Gulf Cooperation Council international locations. primarily based
at the final results theory that managers with powerful governance employ dividends to signal
the safeguarding of shareholders’ pursuits, the subsequent hypotheses are proposed:

H3a. There is a positive relationship between board meeting frequency and the
propensity to pay dividends.
H3b. There is a positive relationship between board meeting frequency and dividend
per share.
Ownership Structure

a. State Ownership.

Authorities investment in groups can enhance a organization’s possibilities thru expanded

monitoring and higher get right of entry to to budget (Lau and Tong, 2008), leading such
firms to pay higher dividends (Wei et al., 2004; Al-Malkawi, 2007; Wang et al., 2011;
Bradford et al., 2013). Signalling principle indicates that investing governments will signal
the gain of their involvement by way of investee firms encouraged to pay more suitable
dividends

Some empirical research discover that state-managed firms struggling weak governance
compensate by means of paying better dividends to appeal to capital marketplace buyers (la
Porta et al., 2000), while other research have a look at a negative relation (Al-Najjar and
Kilincarslan, 2016; Musallam and Lin, 2019; Hasan et al., 2021). based totally on both
signalling and substitute theory arguments, the following hypotheses are proposed:

H4a. There is a positive relationship between the degree of state ownership and the
propensity to pay dividends.
H4b. There is a positive relationship between the degree of state ownership and
dividend per share.

b. Institutional ownership.

In many countries, institutional traders play a crucial governance role and actively take part
in company dividend guidelines (Mehdi et al., 2017), an involvement informed with the aid
of employer idea. Benjamin et al. (2016) and Farinha (2003) argue that such buyers might
also convince companies to pay extra dividends if they believe that management control is
high-priced or ineffectual, though quick et al. (2002) draw upon signalling principle to argue
that such investors may additionally slight the use of dividends as a sign of precise
performance.

Numerous studies find a wonderful relation between institutional ownership and dividends
(Eckbo and Verma, 1994; Chen et al., 2005; Roy, 2015; Elmagrhi et al., 2017; Bataineh,
2020), even as different research discover a terrible relation due to the countervailing
powerful control tracking position of establishments (Abdelsalam et al., 2008; Soliman, 2013;
Roy, 2015; Al-Najjar and Kilincarslan, 2016; Al-Qahtani and Ajina, 2017; Berezinets et al.,
2017; Suwaidan and Khalaf, 2020; Hasan et al., 2021). based on company idea, the
subsequent hypotheses are hence proposed:

H5a. There is a positive relationship between the degree of institutional ownership

and the propensity to pay dividends.
H5b. There is a positive relationship between the degree of institutional ownership
and dividend per share.

c. Managerial ownership.

Director shareholder ownership need to result in interests aligning with wider shareholders
(Adaoglu, 2000), for this reason lowering conflicts, organisation costs, and the want for better
dividends (Chen and Steiner, 2005). in addition, Jensen (1986) and Eckbo and Verma (1994)
draw upon substitute concept and find that firms with extra managerial possession pay
smaller dividends because of their absolute balloting power in dividend decisions, though
Zwiebel (1996) argues that managers can also increase dividends to counterbalance such
opportunistic behaviour.

Alabdullah (2018) unearths that managerial possession is definitely associated with dividends
in Jordan, while Chen et al. (2005), Al-Qahtani and Ajina (2017) and Mehdi et al. (2017)
discover a bad relation for Hong Kong, Saudi Arabia, and in East Asian and Gulf
Cooperation Council united states of america companies, respectively. The hypotheses are
knowledgeable by substitute concept as follows:

H6a. There is a negative relationship between the degree of managerial ownership and
the propensity to pay dividends.
H6b. There is a negative relationship between the degree of managerial ownership
and dividend per share.

d. Family ownership.

Corporations controlled by way of households and extra possession awareness are

commonplace in most rising market economies (Villalonga and Amit, 2006; Rajverma et al.,
2019). circle of relatives ownership produces company issues wherein the principals’ (circle
of relatives shareholders’) interests are inconsistent with shareholder marketers’ (managers)
hobbies,main to tracking of managers through member of the family board and key
management appointments (Gonzalez et al., 2014; Setia-Atmaja, 2017). in addition,
controlling versus minority shareholder war can result in the previous gaining personal
benefits which include generous compensation programs and key executive roles regardless
of the lack of knowledge, thereby increasing the latter’s prices.

A few empirical research discover a nice relation among own family possession and dividend
payouts (Pindado et al., 2012; Adjaoud and Hermassi, 2017; Subramaniam, 2018; Hasan et
al.,2021) with the intention to counteract capability controlling own family shareholder
company issues (Benjamin et al., 2016; Subramaniam, 2018) and to restrict unfastened coins
go with the flow availability (Jensen, 1986; la Porta et al., 2000). but, different research find a
terrible courting (Villalonga and Amit, 2006; Wei et al., 2011; Al-Qahtani and Ajina, 2017;
Reyna, 2017) where own family corporations pay smaller dividends to control funds and gain
to the detriment of the minority shareholders (Setiawan et al., 2016; Rajverma et al., 2019;
Rajput and Jhunjhunwala, 2019). Drawing at the resource control argument, the subsequent
hypotheses are proposed:

H7a. There is a negative relationship between the degree of family ownership and the
propensity to pay dividends.
H7b. There is a negative relationship between the degree of family ownership and
dividend per share.

e. Foreign Ownership.

The effect of foreign ownership on dividend bills is contentious. numerous research endorse a
superb relation (Chai, 2010; Jeon et al., 2011; Aydin and Cavdar, 2015; Mossadak et al.,
2016; Musallam and Lin, 2019) given the general choice of overseas shareholders for better
dividend over better capital gain companies (Lace et al., 2013; Kowerski and Wypych, 2016)
bobbing up from investee marketplace modifications along with terrible corporate
governance and statistics visibility (Le and Le, 2017). In evaluation, different research assist
a bad relation for rising markets (Lin and Shiu, 2003; Sulong and Nor, 2008; Lam et al.,
2012; Al-Najjar and Kilincarslan, 2016) as skilled huge foreign investors represent a
mechanism for stopping opportunistic managerial behaviour and reducing organization prices
(Al-Najjar and Kilincarslan, 2016). moreover, Glen et al. (1995) argue that maximum
overseas institutions choose emerging market shares for his or her longer-time period
increase possibilities in place of shorter-time period dividends. Drawing on those arguments
and the consequences of most of the people of research which support a nice courting, the
following hypotheses are proposed:

H8a. There is a positive relationship between the degree of foreign ownership and the
propensity to pay dividends.
H8b. There is a positive relationship between the degree of foreign ownership and
dividend per share.

Control variable

Similarly to the hypothesized variables, the empirical models include firm function
manipulate variables to account for the versions in firm length, leverage, profitability and
age, consistent with the method hired by way of Al-Najjar and Kilincarslan (2016) and
Suwaidan and Khalaf (2020). They argue that large corporations enjoy more unfastened cash
flows and might consequently pay better dividends than smaller corporations, and more
surprisingly leveraged firms are expected to pay smaller dividends given the competing
imperative to pay extra interest. further, more profitable corporations have more potential to
pay higher dividends than less profitable corporations, and older, extra hooked up
corporations ought to revel in greater strong income than younger companies and
consequently have a tendency to pay higher dividends.

Research methods

This research examines the effect of board composition and the ownership structure on the
dividend policy of Indonesian listed firms using both descriptive and multivariate regression
analyses, consistent with the extant literature (Juhmani, 2020; Suwaidan and Khalaf, 2020).

Samples for this have a look at consisted of dividend announcements at the Indonesian Stoke
Exchange within the duration from 2016 to 2020. We excluded financial firms as they've
exclusive traits than others types of agencies.

The dividend coverage established variables tested are the propensity to pay dividends and
dividend in keeping with proportion. the former dichotomous variable is coded 1 for firms
which have declared and paid dividends, and zero for people who have now not. The latter is
calculated as the extent of cash dividends divided through the number of stocks terrific,
assuming a zero cost wherein the firm will pay no dividends (Al-Najjar and Kilincarslan,
2016; Suwaidan and Khalaf, 2020).

The unbiased variables are ownership structure and corporate board traits: board size,
independence, and meeting frequency, and the degree of kingdom, institutional, managerial,
foreign, and family ownership. summary facts are given in table 1, steady with previous
studies (Gonz´alez et al., 2014; Setia-Atmaja, 2017; Mehdi et al., 2017; Subramaniam, 2018;
Juhmani, 2020; Suwaidan and Khalaf, 2020). There are 4 firm function manipulate variables:
firm size, leverage, profitability and age (Mehdi et al., 2017; Juhmani, 2020; Suwaidan and
Khalaf, 2020).

On this paper, models are expected for every of the two dependent variables, the propensity
to pay dividends and the dividend consistent with percentage. Dividend consistent with share
can take a tremendous price if the firm can pay dividends, and zero in any other case.
Logistic and probit regression processes are employed for modelling the dichotomous
propensity to pay dividends in version 1, consistent with the literature (Franc-Da˛browska et
al., 2020; Bataineh, 2020), whilst OLS and random effect regression procedures are hired to
models 2 the non-stop dividend in keeping with percentage structured steady with Al-Najjar
and Kilincarslan (2016) and Suwaidan and Khalaf (2020), as follows:

Variable Symbol Measurement

Dependent variables
Propensity to pay dividends
Dividend per share
Independent variables
Board size
Board independence
Board meetings
State ownership
Institutional ownership
Managerial ownership
Family ownership
Foreign ownership
Control variables
Firm size
PPD Dummy variable coded as 1 for firms which
declared and paid dividends and 0 for those that
did not
DPS Cash dividends divided by number of shares
outstanding
BS Total number of board members
BI Proportion of board non-executive directors
MB Number of board meetings held during the year
SOWN Proportion of shares held by government
shareholders
INSOWN Proportion of shares held by institutions’
shareholders
MANOWN Proportion of shares held by managers (i.e. the
CEO and/or inside directors)
FAMOWN Proportion of shares held by family members
FOROWN Proportion of shares held by foreign shareholders
SIZE Natural logarithm of total assets
 Firm leverage LEV Total debt to total assets
Firm profitability ROA Net income to total assets
Firm size AGE Number of years since incorporation

Models 1
PPD = β0 + β1 BS + β2 BI + β3 BM + β4 SOWN + β5 INSOWN + β6 MANOWN +
β7 FAMOWN + β8 FOROWN + β9 SIZE + β10 LEV + β11 ROA + β12 AGE + ε

Models 2
DPS= β0 + β1 BS + β2 BI + β3 BM + β4 SOWN + β5 INSOWN + β6 MANOWN +
β7 FAMOWN + β8 FOROWN + β9 SIZE + β10 LEV + β11 ROA + β12 AGE + ε

Where PPD = propensity to pay dividends dichotomous variable; DPS = dividend per share
continuous variable; BS = board size; BI = board independence;; BM = board meeting
frequency; SOWN 5= degree of state ownership; INSOWN = degree of institutional
ownership; MANOWN = degree of managerial ownership; FAMOWN = degree of family
ownership; FOROWN = degree of foreign ownership; SIZE = firm size; LEV = firm
leverage; ROA= return on assets; AGE = firm age; ε = error term.

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