VALUE OF THE FIRM: INFLATION AND ROLE OF DIVIDEND DECISION MEDIATION

Abstract

The objective of this study was to determine the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on dividend decision. Besides, to prove the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on firm value through the role of dividend decision mediation and to determine the direct effect of dividend policy on a value of the firm in the consumer goods industry sector. The analysis method used is path analysis with a sample of 38 companies on consumer goods industry sector, which listed on the IDX during the 2010-2018 period, so the panel data used are 342 data. The results showed that insider ownership and investment opportunity set (IOS) significantly influence dividend decision. However, leverage and inflation do not affect the dividend decision. Also, insider ownership and inflation have a significant effect on the value of the firm but leverage and investment opportunity sets (IOS) do not affect. Dividend decision affects the value of the firm; besides, dividend decision is proven to significantly play a role in mediating the influence of insider ownership and investment opportunity sets (IOS) on the value of the firm.