How to Attract Attention of Investors Through Dividend Policy on the Consumer Goods Industries?

Abstract

This paper aims to examine the effect of leverage on dividend policy, leverage on profitability, and profitability on dividend policy. The number of samples was collected 8 out of 36 companies of the Consumer goods industries listed on the Indonesia Stock Exchange (IDX) period of 2008 - 2014. The Statistical method is analyzed by using Path Analysis. We found that the direct effect of leverage on dividend policy is negative (-0.648); it might be happening because the degradation of leverage could be the management of Consumer goods industries more focused on holding on their profit rather than increasing their leverage. On the other hand, leverage has a positive effect (0.872) on profitability. Then, profitability has a positive effect (1.004) on dividend policy. When the dividend payout ratio’s tendency falls down, the number of investors who want to invest in the consumer goods industries decreases. It was predicted because several firms of the consumer goods industry prefer to reinvest their profits. Therefore, this result implies that the companies must be serious attention to dividend policy to attract investor attention.