The Dynamics of Dividend Policy: The Role of Profitability, Liquidity, and Collateralizable Assets

Abstract

Dividend policy is a critical aspect of corporate management as it influences investor perceptions of a company’s financial health and future prospects. This study examines the impact of profitability, liquidity, and collateralizable assets on the dividend policy of companies listed in the LQ45 index of the Indonesia Stock Exchange from 2018 to 2022. Using purposive sampling, 17 companies were selected, resulting in 85 analytical units. Multiple linear regression analysis and t-tests were employed for hypothesis testing. The findings indicate that profitability positively affects dividend policy, while liquidity and collateralizable assets have a negative impact. High profitability boosts investor confidence through larger dividend distributions, whereas companies with high liquidity and collateralizable assets tend to allocate funds for short-term obligations and operational needs instead of dividends. This study contributes to a deeper understanding of dividend policy determinants in Indonesia, with a novel focus on collateralizable assets, an area rarely explored in prior research.