Dividend policy, leverage, and institutional ownership as agency problem control mechanisms in privatized Indonesian state-owned enterprises

Abstract

This study aims to test the agency theory in privatized Indonesian State-Owned Enterprises. The agency problem in this study was proxied by firm value (Tobin's Q) while the agency problem control mechanism was proxied by institutional ownership, leverage, and dividend policy. This study examines the interchangeable relations between the three variables. The data used in this study are secondary data sourced from the Indonesia Stock Exchange. The research sample is all SOEcompanies that meet the criteria and are listed on the Indonesia Stock Exchange in the 2013-2017 observation period. The analytical tool used in this study was 2SLS (Two-Stage Least Square) with panel data techniques and simultaneous models. The results showed that dividend policy and institutional ownership have a substitution relationship in reducing agency problems, whereas leverage and dividend policy, as well as institutional ownership and leverage, do not have a substitute relationship in reducing agency problems.