ANALYSIS OF FIRM PERFORMANCE DETERMINANTS: THE ROLE OF DIVIDEND POLICY AND CAPITAL STRUCTURE
DOI:
https://doi.org/10.35631/IJEMP.935074Keywords:
Capital Structure, Debt-To-Equity Ratio, Dividend Policy, Dividend Per Share, Firm PerformanceAbstract
A critical indicator of a company’s ability to generate profits and create value for shareholders is its performance. Many financial decisions made by a company (e.g., capital structure, dividend policy) can influence its profitability. As such, the purpose of this study is to examine how both dividend policy and capital structure affect the performance of firms that are part of the LQ45 Index from 2021 through 2024. The methodology used in this study was quantitative. The sampling technique used in this study was purposive sampling, resulting in a total sample size of 37 firms and 148 observations. Data analysis was done using panel data regression. Based on the model selection results, the Random Effects Model (REM) was selected as the dominant model. The results show that business success is positively and significantly impacted by the Debt to Equity Ratio (DER) and Dividend per Share (DPS). However, neither the Dividend Payout Ratio (DPR) nor the Debt to Asset Ratio (DAR) significantly affect company performance. The dividends paid out by the corporation are distributed according to the dividend. These findings corroborate Signaling Theory and Trade-Off Theory, which explain the relationship between dividend policy, capital structure, and company performance. Corporate management should take this research's conclusions into account when creating the optimal financing and dividend policies in order to improve business performance.
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References
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