THE EFFECT OF LEVERAGE, FREE CASH FLOW, LAGGED DIVIDEND, AND BUSINESS RISK ON DIVIDEND POLICY IN JAKARTA ISLAMIC INDEX 70 (JII70) COMPANIES FOR THE 2019-2023 PERIOD

Abstract

This study was conducted to examine and analyze the influence of leverage, free cash flow, lagged dividend, and business risk on dividend policy. The research employs a quantitative method and uses secondary data obtained from annual reports and financial statements of companies consistently listed on the Jakarta Islamic Index 70 (JII70) during the 2019–2023 period, with a total sample of 17 companies and 85 data observations. The data analysis includes descriptive statistical analysis, panel data regression model selection tests, classical assumption tests, panel data regression analysis, and hypothesis testing using EViews 12 software. In determining the appropriate panel data regression model, the Fixed Effect Model (FEM) was found to be the most suitable for this study. The results show that leverage has a negative effect on dividend policy, free cash flow has a positive effect on dividend policy, and lagged dividend has a positive effect on dividend policy, supporting agency theory. Meanwhile, business risk has a positive effect on dividend policy. This research is expected to provide theoretical insights for researchers in the same field, as well as practical benefits for company management and investors in understanding the factors that influence a company’s dividend policy. Future studies are recommended to expand the sample size and observation period, as well as to include additional variables to examine their influence on dividend policy.