The impact of independent directors and family control on the dividend policy and capital structure: A family business strategy

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Abstract

The goal of this research is to determine how independent boards and family company controls affect capital structure and dividend policy. The nature of the independent board moderating variable on the impact of family company control on dividend and capital structure policies is also examined in this study. Twenty-six firms that were listed on the Indonesia Stock Exchange (IDX) between 2018 and 2022 are used in this study’s panel data. The findings indicate that although independent boards have a major positive influence on dividend policy and a negative impact on capital structure, family company control has a considerable negative impact on dividend policy. The independent board’s moderating effect can change how negatively the family firm controls the dividend policy. However, the independent variable board has a significant detrimental impact on the capital structure and moderates the impact of family company control. The dividend payout ratio is significantly positively impacted by firm size and growth potential. Long-term debt decreases as independent board representation increases in family-controlled businesses. The conclusions of this study, it only looks at how family control and independent commissioners affect capital structure and dividend policy; it ignores how different industries operate. It is probable that variations in capital structure and dividend policy among industries. The quantity of dividends and long term debt in the capital structure may therefore be calculated with the addition of industry categorization factors from future research.

Keywords: Family Business, Family Control, Dividend Policy, Capital Structure, Independent Board

Authors’ individual contribution: Conceptualization — R.D.L. and I.S.; Methodology — R.D.L. and H.N.; Investigation — R.D.L., I.S., and H.N.; Resources — I.S.; Writing — Original Draft — R.D.L.; Writing — Review & Editing — R.D.L., I.S., and H.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, L60

Received: 27.06.2023
Accepted: 19.07.2024
Published online: 23.07.2024

How to cite this paper: Laksana, R. D., Shaferi, I., & Naznii, H. (2024). The impact of independent directors and family control on the dividend policy and capital structure: A family business strategy. Corporate & Business Strategy Review, 5(3), 168–175. https://doi.org/10.22495/cbsrv5i3art16