YARDISTIC INTERNATIONAL COLLEGE
MASTERS OF BUSINESS ADMINISTRATION
EVENING PROGRAM
FINANCIAL MANAGEMENT
ARTICLE REVIEW
BY: GETNET TESEMA
January, 2022G.C
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Bibliographical information for the article being reviewed
Novita, Sintiya, Moch Ruhadi and Edman Syarief. "Determinants of Dividend Policy in Jakarta Islamic Index
(Jii) Companies." In International Seminar of Science and Applied Technology (ISSAT 2020), 642648: Atlantis Press, 2020.
The main purpose of the article as indicated in its title is to examine the factors that can
determine dividend policy and it will; contribute to broadening the understanding of
dividend policy in companies listed on the Jakarta Islamic Index (JII).
The major objective of the study was to examine factors that determine dividend policy. The
researchers have tested the effect and relationship of variables such as company size,
liquidity, leverage and profitability on dividend policy which is proxied by dividend payout
ratio.
The research method used is explanatory type of research. Companies that are members of
the Jakarta Islamic Index (JII) were source population and samples of 14 companies that
publish an annual report, financial statement, and summary were taken by purposive
sampling from period 2014- 2018. Secondary data from financial reports and official
websites www.IDX.co.id was collected and analyzed using the technique of Partial Least
Square-Structural Equation Model (PLS-SEM) analysis, which is the existence of path
analysis and regression method and does not require various assumptions that must be
fulfilled by data.
The investigators have stated seven null hypotheses. The first three are about the
independent variable of profitability (ROA) and the last four are about the outcome variable
dividend payout ratio.
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1. H1: Firm size has a positive effect on profitability.
2. H2: Liquidity has a positive effect on profitability.
3. H3: Leverage has a negative effect on profitability.
4. H4: Company size has a positive effect on Dividend Policy.
5. H5: Liquidity has a positive effect on dividend policy.
6. H6: Leverage has a negative effect on Dividend Policy.
7. H7: Profitability has a positive effect on Dividend Policy.
From those seven null hypotheses about profitability only the third one is accepted
(Leverage has a negative effect on profitability) and the rest were rejected. The hypotheses
about the dependent variable of dividend payout ratio were all rejected accepting their
counterpart alternative hypotheses. Thus the study finds out that
 company size had no effect on profitability
 liquidity does not affect profitability
 Leverage has a negative effect on profitability
 that company size has no effect on dividend policy
 Liquidity has a negative effect on dividend policy.
 Leverage has a positive effect on dividend payout ratio
 profitability has a negative effect on dividend policy
The results of the data analysis show that leverage affects profitability (ROA), liquidity
(current ratio), and leverage, and Profitability (ROA) affects Dividend Payout Ratio.
The result of the study indicated that, the Dividend Payout Ratio is influenced by several
variables, namely liquidity (CR), leverage, and ROA (profitability) and the investigators
concluded that firms pay dividends to shareholders when their leverage is high since they
are directly related.
The researchers have tried to critical evaluating and discussing the theoretical empirical
literatures related to the idea of interest. They have used mixture of references like books,
scientific journals. The references used were more or less recent articles.
Even though the objective of the study was to examine the factors related to dividend policy;
the researchers also tried to show the factors determining the rate of return (profitability) in
those financial institutions. In my opinion by doing this they have become prone to errors in
their work. For instance on point 5.3 and point 5.6 they stated two opposite statements; to
mention them; the first said “The results of the study indicate that Leverage has a negative
effect on profitability” while the other reported as “This study reveals that Leverage has a
positive effect on profitability.” The study should have been clear if it has only one
dependent variable i.e dividend payout rate.
There is certain consistency in the findings of the study with other literatures and theoretical
frameworks like that of profitability (ROA).They have found that liquidity is indirectly
related to dividend payout ratio in the contrary to the theoretical assumptions.
Generally the study has contributed to the current knowledge of factors affecting the level of
dividend payout ratio while having some limitations.