Assessment of Financial Performance and the Effect on Dividend Policy of the Banking Companies Listed on the Indonesia Stock Exchange

Abstract

This study aims to determine the assessment of financial performance and the effect on dividend policy of banking companies listed on the Indonesia Stock Exchange in the period of 2014–2017. The assessment of the company’s financial performance is important. Results of the assessment will be consideration of financial performance for investors, one of them to predict the dividend policy. The prediction results will influence investors in making investment decisions. This study employs a quantitative approach. The assessment of financial performance is measured using variables

of leverage, profitability and profit growth. They were analyzed using the multiple linear regression method. At the 0.05 significance level, the results of this study showed

that the leverage has a negative and significant effect on dividend policy. Meanwhile,

profitability and profit growth have no effect on dividend policy. In order to explain

the influence between variables, the research is based on the theories underlying the

dividend policy, namely the theory of residual dividends and smoothing theory. The

results of this study support the residual dividend theory, that one of the dividend policies is determined by the company by considering the target capital structure and then

distributing dividends with only the remaining profit.