Determinants of Dividend Policy in the Banking Industry Listed on the Indonesia Stock Exchange

Watanaya, Lintar Novianti and Murhadi, Werner Ria (2026) Determinants of Dividend Policy in the Banking Industry Listed on the Indonesia Stock Exchange. Media Ekonomi Journal, 31 (1). pp. 126-136. ISSN 2656-8861 (Submitted)

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Abstract

Abstract Purpose: Evidence on the determinants of bank dividend policy remains inconsistent, and prior studies rarely distinguish the decision of whether a bank pays dividends from the decision of how much it pays. This study addresses that gap by examining the effect of profitability (ROA), bank size (BSIZE), capital adequacy (CAR), and credit risk (NPL) on both dimensions of dividend policy in the Indonesian banking sector. Research Methodology: The data comprise 37 conventional commercial banks listed on the Indonesia Stock Exchange during 2020–2024 (185 observations). Two complementary techniques are applied: panel data regression (Fixed Effect Model) to examine the determinants of the Dividend Payout Ratio (DPR), and Multiple Discriminant Analysis (MDA) to determine the likelihood of dividend payment measured by the Propensity to Pay Dividends (PPD). Results: ROA, BSIZE, and CAR have a significant positive effect on DPR, whereas NPL has a negative but insignificant effect. The MDA indicates that BSIZE is the most dominant determinant of the decision to pay dividends, followed by ROA and CAR, with a classification accuracy of 82.2%. Conclusions: Bank dividend policy is multifactorial and unfolds as a two-stage decision: bank size and profitability chiefly drive the decision to pay dividends, while profitability and capital strength chiefly drive the size of the payout. Limitations: The relatively short observation period (2020–2024) was still influenced by post-pandemic credit-relaxation policies. Contributions: Theoretically, this study extends life-cycle, signaling, and prudential-risk perspectives on dividend policy to the earlier and more fundamental decision of whether a bank pays dividends at all, showing that this decision and the decision on payout size are driven by partly different mechanisms. Practically, bank management can use bank size, profitability, and capital strength jointly as indicators for designing a sustainable and countercyclical dividend policy.

Item Type:	Article
Uncontrolled Keywords:	Bank Size; Capital Adequacy Ratio; Dividend Policy; Non-Performing Loan; Return On Assets
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Faculty of Business and Economic > Department of Management
Depositing User:	BAMBANG SEPTIAWAN
Date Deposited:	13 Jul 2026 01:52
Last Modified:	13 Jul 2026 01:52
URI:	http://repository.ubaya.ac.id/id/eprint/50947

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