Predictability Power of Dividend Policy and Leverage Policy to Managerial Ownership in Indonesia : An Agency Theory Perspective

The paper is expansion from Mahadwartha (2002b) that is use Logit model to test the predictability power of leverage policy and dividend policy to managerial ownership policy. Leverage and dividend variable used already divided the interest of inside shareholders and outside shareholders. The paper also use a modification on managerial ownership variable with lead one year after (t+1), an addition of control variable (current assets) to increase predictability model. The researh period is from 1993 until 2001. The research argue that leverage policy and dividend policy have higher effect on managerial ownership in t+1 than t.The result shows consistency regarding predictability power of leverage policy and dividend policy to managerial ownership. Also shows that the predictability power is higher than Mahadwartha (2002b). The relationship between leverage and dividend to managerial ownership is negative with higher magnitude than Mahadwartha (2002b). The results consistent with Agency Theory prediction, that there is substitution between policies in bonding and monitoring mechanism to control agency conflict