Mercubuana University,
Jakarta, Indonesia
Email: lusia.sri.arini@mercubuana.ac.id.
KEYWORDS |
ABSTRACT |
dividend policy, share prices, manufacturing
companies |
Research Objectives: The primary objective of this study is to
analyze the impact of dividend policy on share prices in manufacturing companies
listed on the Indonesia Stock Exchange. Specifically, the research aims to:
Examine how different dividend policies affect investor perceptions and their
subsequent influence on share price movements. Identify the key factors
within dividend policies that contribute to fluctuations in share prices.
Explore the implications of dividend policy decisions on long-term investor
confidence and market behavior. Revised Statement: Dividend policy is a
strategic decision made by a company regarding how to utilize its
profits—whether to distribute them as dividends to shareholders or retain
them for further investment in the business. This research focuses on
analyzing the impact of dividend policy on share prices in manufacturing
companies listed on the Indonesia Stock Exchange. The study employs a
qualitative approach, gathering information through a comprehensive
literature review. The data collected undergoes several stages of analysis,
including data simplification, visualization, and the formulation of conclusions.
The findings indicate that dividend policy significantly affects share
prices. Dividend policy shapes investor perceptions of the company, which in
turn influences share price movements. For instance, consistent dividend
payments can bolster investor confidence and send a positive signal about the
company’s performance, potentially driving buying activity in the market.
Conversely, a reduction in dividend payments might raise investor concerns,
possibly leading to a decline in share prices. Research Implications: The
implications of this study are twofold. First, for corporate decision-makers,
the research underscores the importance of carefully considering dividend
policies as they directly influence investor confidence and share price
stability. Second, for investors, the findings provide insights into how
dividend policies can serve as indicators of a company’s financial health and
future performance, guiding their investment decisions. |
DOI:
10.58860/ijsh.v3i9.232 |
|
Corresponding
Author: Lusia Sri Arini *
Email: lusia.sri.arini@mercubuana.ac.id.
INTRODUCTION
Manufacturing
companies have a significant impact on the Indonesian economy, as can be seen
from the multiplicity of these companies traded on the Indonesia Stock Exchange
(IDX). In carrying out their operations, these companies depend on investment
from investors
According to
Purwaningsih
Dividend
policy refers to decisions about how profits earned by the company will be
treated, whether they set to be distributed to investors as dividends or
retained as earnings to fund future investments
Dividend
policy is a crucial aspect in making company financial decisions, especially for
production companies. This decision selection determines the amount of profit
that will be allocated to shareholders as dividends and the portion that will
be kept for reinvestment or other uses. Dividend policy can influence the way
investors view a company, which in turn influences share price fluctuations
Earlier
studies carried out by Fitri & Purnamasari
Other research
by Husein & Kharisma
The novelty in
this research is related to current market conditions and changes in economic
policy and capital markets. It is important to consider that findings from
previous studies may not be fully relevant if the market has undergone
significant changes or if economic and capital market policies have changed
since the period of the study. So based on this background, the problem
formulations raised are: How does dividend policy affect stock price changes in
manufacturing companies listed on the Indonesia Stock Exchange (IDX)?
This study
intends to provide a deeper insight into how decisions regarding dividend
distribution affect investor behaviour and stock price movements
The findings
of this research are anticipated to offer practical benefits for company
managers in making informed decisions about dividend policies that align with
investor expectations and market conditions. By understanding the impact of
dividend policies on stock prices, companies can enhance their strategic
financial planning, potentially increasing their market valuation and investor
satisfaction. Additionally, the study provides valuable insights for
policymakers and investors, offering guidance on how to interpret dividend
signals and make investment decisions in the context of the Indonesian capital
market.
METHOD
This study
employs a qualitative method with a descriptive approach as its research
technique. Qualitative research is an approach that does not rely on numbers or
statistical data but rather focuses on qualitative evidence such as words,
images, or behavior. This method aims to understand and interpret phenomena in
a deep and contextual way
The process of
gathering data for this study was conducted using a review of existing
literature, namely collecting data from available sources, such as information
listed on the “Indonesia Stock Exchange (IDX)” page and relevant previous
research. Once the data is gathered, an analysis is performed in three phases,
such as simplifying, sorting and focusing the data that has been collected to
make further analysis easier. Next, the data is arranged in the form of a
systematic description or narrative to offer a clear overview of the phenomenon
under investigation. The closing stage is to draw conclusions from the data
that has been presented, with the aim of providing a meaningful interpretation
and answering the research questions. The study identified two main variables,
namely (X1) Dividend Policy as the independent variable and (Y) Stock Price
Change as the dependent variable. The hypothesis proposed in this study is
whether dividend policy has a significant effect on changes in stock prices in
manufacturing companies listed on the IDX
RESULT AND DISCUSSION
The influence
of dividend policy on changes in share prices in manufacturing companies shows
how a company's decision to distribute dividends can influence the market value
of its shares, both positively and negatively, based on investors' reactions to
the returns they receive. Research conducted by Mahmud
Building a
better economy is crucial to improving people's welfare and moving the country
forward. An improved economy can create jobs, increase incomes, and reduce
poverty. However, achieving this requires support from various parties,
including the government, private sector, communities, and international
institutions. The government plays a
role in setting policies that support economic growth, such as
business-friendly regulations, investment in infrastructure, and education and
skills training programs. The private sector, on the other hand, contributes by
investing, creating jobs, and encouraging innovation and productivity
The
manufacturing sector exerts a substantial influence on national economic
expansion in many countries, including Indonesia. This sector is essential to
creating jobs, increasing the added value of products, and strengthening
economic competitiveness. The contribution of the manufacturing sector to Gross
Domestic Product (GDP) is usually quite significant because it involves various
industries such as automotive, textile, food and beverage, electronics, and
many others. Apart from that, the manufacturing sector also plays a role in
increasing exports, which in turn can strengthen foreign exchange reserves and
economic stability. In Indonesia, the manufacturing sector is one of the main
drivers of economic growth, and the government often pays special attention to
developing this industry through various policies and incentives. This includes
efforts to increase investment, improve the quality of the workforce, and
encourage technological innovation in the production process
Company income
often comes from investments made by investors, whether in the form of
purchasing shares, bonds, or other forms of investment. Dividends can be a
major attraction for investors as they provide a passive income stream and
reflect the financial health of the company
Investments
involve risk and uncertainty because asset values can change due to several
factors such as market fluctuations, economic climate, and policy changes.
Therefore, investors should consider these potential risks when making
investment decisions. Dividends are a way for companies to return a portion of
profits to investors in return for their investment. Dividend payments are
usually made periodically, for example, every quarter or year, and the amount
can vary depending on the company's policy and its financial condition and
profitability. This dividend distribution depends regarding the company's
financial results and dividend strategy set by company management. If the
company does not generate sufficient profits or chooses to retain profits for
reinvestment, dividends may not be distributed
Dividends are
paid from the company's net profit, which is profit after deducting all costs
and taxes. To ensure consistent dividend payments, a company must have
sufficient and stable profits. Apart from net profit, operational cash flow is
also important because it shows the availability of cash generated from the
company's main activities. The dividend payout ratio, which shows the
percentage of profits distributed to shareholders, provides an idea of how much
profit is allocated to dividends
Factors such
as leverage, liquidity, and profitability affect a company's dividend policy
and may impact investment decisions. Profitability is a key factor because
companies that generate high profits tend to be better able to pay dividends to
shareholders. Liquidity is also very important because the company must have
sufficient cash to distribute dividends without sacrificing operational needs.
Leverage, which measures the proportion of debt to equity, also influences
dividend policy, as a highly leveraged company may choose to retain profits to
strengthen its financial position and meet debt obligations rather than paying
larger dividends. The combination of these factors determines how a company
balances between maintaining cash for internal needs and distributing profits
to shareholders
A consistent
or increasing dividend policy each year can help increase investor confidence,
as it shows that the company has good financial health and positive prospects.
An increase in dividends signals that the company can produce sufficient
earnings to distribute to shareholders on a regular basis. This increased
confidence can attract new investors and support demand for the company's
shares in the capital market. With increased requests, share prices tend to
rise, creating a balance between supply and demand that favours the company in
the capital market
In financial
markets, variations in stock prices are typical and influenced by a variety of
factors. The increase and decrease in share prices is
directly tied to a company's value, as stock prices are often considered a
reflection of the company's value from the perspective of investors. When
investors believe that the value of a company will increase, either due to good
financial performance, growth prospects, or favourable economic conditions, the
company's share price tends to rise. Conversely, if there are indications that
the company's value may decline, the share price may fall. Therefore, share
price fluctuations in the capital market reflect changes in investors' views on
the company's current and future value
Shares are
securities that show the stake or shareholding of an individual or entity in a
company. Shareholders have the right to receive a portion of the company's
profits, which are distributed as dividends and have voting privileges at the
annual meeting of shareholders to decide on various company policies. Shares
are traded on stock exchanges, and their value can fluctuate depending on
company performance, market conditions, and other economic factors. As a form
of investment, shares allow investors to gain profits from share price
appreciation and dividends but also face the risk of price fluctuations and
potential losses. Meanwhile, share prices are prices that occur in the real
market, namely the prices at which shares are traded on stock exchanges such as
the Indonesian Stock Exchange (BEI). The rise and fall of stock prices is influenced by the number of enthusiasts or market demand
for these shares. When demand for shares increases, for example, due to
positive news about the company or good profit prospects, the share price tends
to rise as many investors want to buy the shares. Conversely, if demand
decreases or there is negative news affecting perceptions of the company, the
share price may fall as investors sell their shares. This price is not fixed
and can change quickly for a variety of reasons, such as how the company is
performing (for example, higher or lower profits), the general economic
situation, relevant recent news, and how the market as a whole
feels or believes about future prospects. The share price seen in the
real market reflects the value that buyers are willing to pay and the value
that sellers are willing to accept at that time
Thus, dividend
policy affects changes in stock prices in manufacturing companies listed on the
Indonesia Stock Exchange (IDX) because decisions regarding dividends are often
considered financial signals that reflect the health and prospects of the
company. When a company announces a dividend increase, investors often view
this as a positive indicator of the company's stable cash flow and confidence
in future performance. This signal can increase investor interest, thereby
pushing the stock price up. On the other hand, if a company cuts or suspends
dividends, this could be seen as an indication that the company is facing
financial difficulties or concerns about business sustainability, which might
result in a decrease in the share price. Thus, dividend policy serves as a key
measure for investors in evaluating the value and stability of the company.
CONCLUSION
This research
demonstrates that dividend policy significantly influences stock prices,
aligning with the research objectives. The findings reveal that dividend
distribution can enhance investor confidence, signal positive company
performance, and stimulate investors to purchase shares in the market. A large
dividend announcement is typically perceived as an indication of the company’s
strong financial position, attracting investors and potentially driving up
share prices. On the other hand, a decision to reduce or withhold dividends may
be interpreted as a sign of financial distress, leading to a decrease in share
prices due to diminished investor confidence. However, the impact of dividend
policy on stock prices is not absolute and can be moderated by various other
factors, indicating the need for a broader consideration in investment
decisions.
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Creative Commons Attribution (CC BY SA) license (https://creativecommons.org/licenses/by-sa/4.0/). |