Volume 4, Issue 8, August – 2019 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Determinant Dividend Payout Ratio

Long-term Analysis of the Four Book Banks for the
Period 2008 – 2017
Ayu Aulia Rahma Andam Dewi Syarif
Master of Management, Mercubuana University Lecturer of Postgraduate, Mercubuana University
Jakarta, Indonesia Jakarta, Indonesia

Abstract:- This study is to analyze how the influence of The greater the bank's capital, the more business
return on asset, return on equity, net interest margin, loan opportunities that can be worked on. In addition to being
to deposit ratio. and non-performing banking loans listed considered healthier and more competitive to face competition
in book four 2008-2017. Sampling in this study uses a with major banks in the ASEAN region, Book 4 is also
quantitative approach. samples were obtained and used believed to be able to deal with emerging risks associated with
were 4 with an observation period of 10 years. The data overseas business expansion. with the advantages of book
used in this study is secondary data using panel data bank 4 which of course has better endurance in dealing with
analysis methods. The results showed that the variable the Indonesian and global economy. It can be seen that the
return on assets significantly influence the positive fluctuating dividend is also unavoidable and even tends to
direction of the dividend payout ratio. variable return on decrease. with the above considerations, this research is based
equity has a significant effect but with a negative direction on book bank 4.
from the dividend payout ratio. Net interest margin
variable has a significant effect but with a negative Figure 1, illustrates that the four book 4 banks that
direction from the dividend payout ratio. Loan to deposit routinely distribute dividends also experience a fluctuating
ratio variable significantly influences the positive direction trend at the end of each period. From the table, there is a
of the dividend payout ratio. Non-performing loan noticeable fluctuation in the stock return trend since 2009 and
variables have a significant effect but with a negative the sharpest decline occurred in 2015, where the DPR reached
direction from the dividend payout ratio. 23%. and until 2017, the DPR experienced an increase to 38%
but not as high as the 2008 DPR which reached 46%.
Keywords:- ROA, ROE, NIM, LDR, NPL, DPR.

I. INTRODUCTION

Investors who want to invest their capital in the banking

sub-sector by hoping the dividend will certainly consider
several factors, one of them by looking at the performance of
the bank. Since 2012, Bank Indonesia has issued regulations
that classify commercial banks into specific categories which
are part of the structuring of the Indonesian banking structure
as well as in order to improve competitiveness, intermediation
and governance and reduce risks to the banks concerned.

The category of commercial banks is divided into 4

categories including commercial banks business groups 1
(book 1), commercial bank group business 2 (book 2), Fig. 1: - Average development of bank book 4 dividend
commercial bank group business 3 (book 3), commercial bank payout ratio 4 in 2007 – 2017
group 4 (book 4). This study uses the largest group of banks Source: Processed by the writer (2018)
with core capital, book 4. With core capital ownership above
30 trillion, book bank 4 has the capacity to absorb greater Information that can help investors' decisions to invest in
potential risks compared to other bank groups and is also banks is the bank's financial ratios obtained from financial
allowed to have a wider service network both at home and statements, bank financial statements show the overall
abroad. For investors, access is what might attract interest financial condition of the bank (Kasmir, 2003). While the
because the ease of banking services is one of the keys to financial ratio is a comparison of numbers in the financial
feeling safe to invest. statements by making comparisons between its components so

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 Volume 4, Issue 8, August – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
that it becomes a number in one period or several periods. 1) Signaling Theory
(Kasmir, 2008). Signaling theory was first developed by Akerlof (1970)
and subsequently developed by Spence (1973) with signal
Profitability ratio that are often used are return on assets equilibrium theory, which depends on which party a good
and return on equity which indicate the extent of efficiency in company can distinguish itself from a bad company by
managing assets and bank management in generating profits. sending credible signals which can be trusted related to the
NIM shows how the ability of banks to manage earning assets quality of the capital market. a signal is considered reliable
to generate net income from interest income subtracted from only if the company with bad categories cannot replicate the
interest expense. NIM itself aims to evaluate banks in good company category.
managing various risks that may occur in interest rates. This
means that when interest rates change, interest income and 2) Dividend relevance theory (Gordon’s Model)
fees will also change. According to Gordon (1993) dividend policy is relevant
to the value of the company. In this case, investors will prefer
Liquidity ratio in this study is a loan to deposit ratio that dividend payments to be received now than capital gains that
measures how far the bank's ability to refinance withdrawal of will be received in the future. according to this theory,
funds made by depositors by relying on loans provided or in investors will feel safer to get dividends now than future
other words the ability of banks to repay withdrawal funds that capital gains that are full of risk and uncertainty.
have been carried out by depositors by relying on the credit
borne by the bank. 3) Dividend Irrelevance Theory
This theory is the opinion of Modigliani and Miller (M-
Previous studies related to factors affecting dividend M 1961) which states that the value of a company is not
distribution are sustainable and Sulistyawati (2017) states that determined by the size of the Dividend Payout Ratio (DPR)
ROA is significant for the DPR. Chun Lin, Thaker, Asmy, and but is determined by net income before tax (EBIT) and
Thas Thaker (2018) states that ROA and ROE are not business risk. Thus the dividend policy is actually not relevant
significant to the DPR.Ali Khan and Ahmad (2017) said ROE to be questioned.
was significant towards the DPR. Siddiqua, Haque,
Chowburry (2016) stated that the NIM was significant towards 4) Tax Preference Theory
the DPR. Rasyid (2018) states that the NIM is not significant According to this theory, individuals will choose whether
to the DPR. Ahmed (2015) states that LDR is significant to accept the company's income distribution as dividends or
towards the DPR.Murni (2016) Pure stated that LDR was not capital gains. If the tax liability on the distribution of capital
significant to the DPR. Fauziah and Iskandar (2015) stated gains from capital gains is lower than the tax on dividends,
that NPL was significant towards the DPR. Rasyid (2008) then investors will prefer capital gains.
states that the NPL is not significant to the DPR
5) Clientele Effect
Based on the trend of decreasing dividend payout ratio, Stated that different groups of shareholders will have
the fluctuation of financial ratios at book bank four during the different preferences on the company's dividend policy.
period 2008 - 2017, and the results of various previous studies, investor groups that need income now prefer a high dividend
therefore the authors raise the research topic as follows: payout ratio. conversely, groups of investors who don't really
"DETERMINANT DIVIDEND PAYOUT RATIO: LONG- need the money right now are more likely if the company
TERM ANALYSIS, IN THE FOUR BOOK BANK OF 2008 - holds back most of the company's net income.
2017 PERIOD "
B. Financial Ratio
II. THEORITACAL REVIEW According to Ross, Wasterfield and Jordan (2009),
financial ratios are relationships calculated from a company's
A. Dividend Policy financial information and are used for comparison purposes.
Dividends represent the value of net income in the Financial ratios are used in quantitative analysis to evaluate
company after tax deducted by retained earnings as a company various aspects of a company's operating and financial
reserve (Ang, 1997). According to Sartono (2001) dividend performance based on information contained in the company's
policy is a decision whether the company will share with financial statements such as a balance sheet, Cash flow
shareholders as a dividend or will be held in the form of statement and income statement This financial ratio can be
retained earnings to finance investment in the future. If the used by company management, creditors or lenders as well as
company chooses to distribute profits as dividends, it will investors and shareholders.
reduce retained earnings and reduce the total source of internal
financing funds conversely, if the company chooses to hold C. Dividend Payout Ratio
the profits obtained, the ability to form internal funds will be According to Ang (1997), Dividend payout ratio is the
even greater. The following are various theories that emerged ratio between dividend per share and earnings per share. thus,
along with research on dividends (Frankfurter, 2003): the higher the DPR is set by a company, the greater the

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 Volume 4, Issue 8, August – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
amount of corporate profits to be paid as dividends to A large return on equity shows the level of efficiency and
shareholders. effectiveness of investment, operating and funding
performance of the company, the level of efficiency and
D. Return on Asset effectiveness. H2: ROE is suspected to affect the DPR.
According to a circular letter of Bank Indonesia No.
6/23/DPNP dated May 31, 2004 states ROA as a ratio that Net Interest Margin shows the interest income obtained
assesses how the rate of return of assets owned. from the comparison of interest provided (example: deposits)
with interest income from lending (interest on loans). H3:
E. Return on Equity NIM is suspected to affect the DPR.
According to Riyadi (2006) Return on Equity (ROE) is a
comparison between net income and capital (core capital) of a Loan to Deposit Ratio shows the ability of banks to
company. return funds withdrawn by customers by relying on funds
channeled to the public. If the LDR gets higher the bank
F. Net interest Margin liquidity is low. H4: LDR is suspected to affect the DPR.
According to riyadi (2006) Net Interest Margin (NIM) is
a comparison between the percentage of interest yields to total Non Performing Loan indicate how much problem loans
assets or to total earning assets. and one ratio to as If the NPL increases, the amount of capital
owned by the bank will decrease. H5: NPL is suspected to
G. Loan to Deposit Ratio affect the DPR.
According to Riyadi (2006) Loan to deposit (LDR)
comparison between total loans granted with total third party III. METHODELOGY
funds (DPK) that can be collected by banks.
In this study the population used is a book four banking
H. Non Performing Loan company with a time span of 2008 - 2017. determination of
According to Riyadi (2006) states Non-Performing sample returns using a purposive sampling method. namely
Loans (NPL) is one of the measurements of the bank's the selection of sampling samples only four book banking
business risk ratio that shows the magnitude of the risk of companies. there are 5 samples in this study but 4 companies
problem loans that exist in a bank. were taken because 1 and 5 companies in book four contain
outlier data.
I. Theoritical Framework
The theoretical framework in this study can be described Code Company
as follows:
BMRI PT. Bank Mandiri, Tbk
BBNI PT. Bank Negara Indonesia, Tbk
ROA (X1) BBRI PT. Bank Rakyat Indonesia, Tbk
BBCA PT. Bank Central Asia, Tbk
ROE (X2)
Table 1: Research Sample
Source: Processed by the writer (2018)
NIM (X3) DPR (Y)
Data collection methods for the purposes of this study
were carried out by the documentation method documentation
LDR (X4) carried out by collecting all secondary data published by IDX
statistics about banking companies listed on the Indonesia
NPL (X5) Stock Exchange for the period 2008 - 2017.

Fig. 2: - Theoritical Framework This research uses quantitative analysis techniques with
Source: Theoretical Review statistics namely panel data regression analysis with the help
of e-reviews program version 9.5. The equation used for
J. Hypothesis analysis is as follows:
Return on Assets shows the company's strength in
generating profits. The greater the ROA, the better the
productivity of assets to get a net profit. H1: ROA is suspected
to affect the DPR.

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 Volume 4, Issue 8, August – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Information: IV. RESULTS AND DISCUSSION
Yit. = Response variables in the i-th observation unit and t-
time Panel data linear regression analysis in this study uses
Xit. = Predictor variables in the first observation unit and t- the Common Effects method for the diagram model. The
time selection of the common effects method as a panel data
a. = Intercept regression model analysis method in this study was previously tested through
B. = Slope coefficient or direction coefficient the chow test, the Hausman test, and the LM test first so that
Eit. = Galat or component error in the i-th observation unit finally the common effects method is the most appropriate for
and t-time the diagram model. The following results are estimated in the
linear regression model in table 2 bellow.

Information Coefficient t-statistics Probability

C 96.4363 11.4221 0.0000
ROA 7.9333 2.6020 0.0136
ROE -1.0778 -4.2304 0.0002
NIM -4.8743 -2.8698 0.0070
LDR -0.6145 -4.4468 0.0001
NPL 13.3237 5.0255 0.0000
R-squared 0.6906
Adjusted R-squared 0.6451
F-statistic 15.1799
Prob (F-statistic) 0.0000
Table 2: - Common Effect Model
Source: Eviews 9

By using the common effect model, the panel data 6) NPL (X5) = 13.3237, if there is an increase in the NPL
regression equation is formed as follows: variable by one unit, then the variable DPR (Y) increases
by 13.3237 assuming the variables X1, X2, X3 and X4 are
DPR = 96,4363 + 7,9333ROA – 1,0778ROE - 4,8743NIM - constant.
0,6145LDR + 13,3237NPL
A. Simultaneous Test
The above equation explains that: Simultaneous based on table 2 above, it is known that for
1) Constanta = 96,4363 The value on the positive constant DPR (Y) as the dependent variable it has a value of F =
shows the positive effect of the independent variable 15.17991 and a value of prob = 0.0000 while a table F value
(ROA, ROE, NIM, LDR and NPL). If the value of each with df = nk-1 = 34 and k = 5 shows a value of F = 2.49, it can
independent variable is 0 (constant) then the DPR (Y) has be seen the value of F statistic = 15.17991 > value of f table =
increased by 96.4363. 2.49. Thus H0 is rejected, this means that the independent
2) ROA (X1) = 7,9333 if there is an increase in the ROA variables together have a significant effect on the dependent
variable by one unit, then the DPR variable (Y) increases variable significance test (F test).
by 7.9333 assuming the variables X2, X3, X4, and X5 are
constant. B. Partial Test
3) ROE (X2) = - 1.0778 , If there is an increase in the ROE The ROA probability of 0.0136 is smaller than 0.05 so
variable by one unit, then the DPR variable (Y) decreases that this variable is in the rejection area of H0 which means
by 0.1262 with insurance variables X1, X3, X4 and X5 that ROA affects the dividend payout ratio of four book banks
constant. in 2008-2017.
4) NIM (X3) = - 48743, If there is an increase in the NIM
variable by one unit, then the DPR variable (Y) decreases ROE probability of 0.0002 is smaller than 0.05 so that
by -4.8743 assuming the variables X1, X2, X4, and X5 are this variable is in the rejection area of H0 which means that
constant. ROE affects the dividend payout ratio of 4 book banks in 2008
5) LDR (X4) = -0.6145, if there is an increase in the variable – 2017.
NPM by one unit, then the variable DPR (Y) decreases by -
0.6145 assuming the variables X1, X2, X4 and X5 are
constant.

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 Volume 4, Issue 8, August – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
The NIM probability of 0.0070 is smaller than 0.05 so [11]. Lin, O.C,. Thaker, H.M.T,. Khaliq, A,. & Thaker,
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