INFLUENCE OF FINANCIAL PERFORMANCE ON DIVIDEND POLICY: EVIDENCE IN BANKING COMPANIES ON THE INDONESIA STOCK EXCHANGE

- This study aims to examine the effect of the variable capital adequacy ratio, debt-to-equity ratio, return on assets, and loan-to-deposit ratio on dividend policy. The study was carried out using a quantitative approach. The sample in this study was 12 banking companies listed on the Indonesia Stock Exchange for the 2019-2021 period. Determination of the sample using a purposive sampling method. The analytical tool used is Multiple Linear Regression Analysis. The results of this study indicate that the capital adequacy ratio variable has a negative effect on dividend policy, the debt-to-equity ratio has no effect on dividend policy, return on assets has a negative effect on dividend policy and loan to deposit ratio has no effect on dividend policy. This study implicates companies and policymakers in Ministries and Government Agencies in Indonesia to regulate the company's dividend policy on the Indonesian stock exchange so that it is mutually beneficial for companies and investors. This is the first study that examined dividend policy to influence financial performance in banking companies on the Indonesia stock exchange.


INTRODUCTION
Every company sets its own dividend policy, determining the amount of profits to be shared with shareholders and the amount of profits to be retained by the company.When a company distributes larger profits in the form of dividends, it may become more attractive to potential investors.This is because potential investors often view such companies as being in good financial health with promising future prospects.In evaluating a company's financial health, investors consider several aspects, including f inancial performance.Financial performance is analyzed to assess how well a company is performing (Erjawan, 2018).
Financial ratios are indicators that connect two accounting figures and express their relationship by dividing one number by another (Kasmir, 2017: 93).By analyzing financial ratios, one can determine the condition and health of a company during a specific period.The financial ratios used in this study are Capital Adequacy Ratio (CAR), Debt-to-Equity Ratio (DER), Return on Assets (ROA), and Loan-to-Deposit Ratio (LDR) (Erjawan, 2018).
Capital Adequacy Ratio (CAR) is a ratio that demonstrates a bank's ability to provide funds to overcome the possibility of risk loss.This ratio is important because keeping the CAR at safe limits (minimum 8%) also means protecting customers and maintaining financial system stability.Higher CAR values reflect a bank's increasing ability to withstand the possibility of risk loss.Research results from Erjawan (2018), Wahyuni (2014), Limbog (2015), and Prayunita (2016) conclude that the Capital Adequacy Ratio (CAR) has a positive effect on the dividend payout ratio.However, Rasyid (2018) concluded that CAR had a negative effect on the dividend payout ratio.This is contrary to Murni (2017), which concludes that CAR is not influential in the dividend payout ratio.
Debt to Equity Ratio (DER) is a ratio used to evaluate the financial position of a company.This ratio assesses the ability of the company to pay off its obligations by comparing all debts, including current liabilities, with the total equity.This ratio is useful for knowing the amount of funds provided by creditors with the owner of the company (Kasmir, 2017: 112).Research results from Aristanto (2015), Pramana, Sukaertha (2015), Limbong (2015), Praja (2017), and Kurniawan (2017) conclude that DER has a negative effect on the Dividend Payout Ratio.On the other hand, Prayunita (2016), Modyoningrum (2016), andNursada (2017) concluded that DER has a positive effect on the Dividend Payout Ratio.This is in contrast with Endang, Dzulkirom, Prawira (2014), Erjawan (2018), andSwastyastu, Yuniartha, Atmaja (2014), who concluded that DER is not influential on the Dividend Payout Ratio.
Return On Assets (ROA) is a ratio that demonstrates the profitability of a company by showing the percentage of net profit obtained in relation to the total power source or the average number of assets.In other words, ROA measures how efficiently a company manages its assets to produce profit during a certain period.Research results from Apriani (2016), Aristanto (2015), Modyiningrum (2016), Ariasih (2016), and Erjawan (2018) conclude that ROA has a positive effect on the Dividend Payout Ratio.However, Rasyid (2018) and Swastyastu, Yuniartha, Atmaja (2014) concluded that ROA has a negative effect on the Dividend Payout Ratio.This is contrary to Murni et al. (2016), Wahyuni (2014), andPraja (2017), who concluded that ROA is not influential in the Dividend Payout Ratio.
Loan to Deposit Ratio (LDR) is a ratio between the volume of credit extended by a bank and the amount of funds received from various sources.LDR is related to a company's banking finance ratio and liquidity.It measures the level of liquidity by showing the number of deposit futures, current accounts, savings, and other accounts that are used to fulfill loan applications from customers.A high ratio shows that a bank lends all its funds (illiquid), while a low ratio indicates a liquid bank with excess available funding capacity for lending (Latumaerissa, 1999:23).In Erjawan (2018), LDR is also known as the ratio of credit to total party funds, which is used to measure party funds that are distributed in the form of credit.Research results from Limbong (2015), Rasyid (2018), and Pratiwi (2017) conclude that LDR has a positive effect on policy dividends.However, Murni (2017) concludes that LDR has a positive effect on policy dividend.This is different from the findings of Erjawan (2018), Wahyuni (2014), and Prayunita (2016), which conclude that LDR is not influential on policy dividends.

Dividend Policy
Sartono (2008:281) defines dividend policy as the decision on whether the profit earned by a company will be shared with shareholders as dividends or will be retained for future investment.The dividend policy is concerned with the determination of earnings between the use of income to pay shareholders as dividends or to be used within the company for meaningful profit that must be held inside the company.The dividend policy refers to the company's choice of whether to share dividends in cash or in other forms, the magnitude of the dividends to be shared, and the frequency of dividend sharing.

Capital Adequacy Ratio (CAR)
The Capital Adequacy Ratio (CAR) is the ratio of functioning capital adequacy that accommodates the risk of possible losses faced by banks.Bank Indonesia requires the bank's CAR ratio to be at least eight percent, and the higher the bank's CAR, the better.CARs are a comparison between capital and assets weighted according to risk (ATMR).

Debt to Equity Ratio (DER)
The Debt to Equity Ratio (DER) is the debt ratio used to measure how much of the company's assets are financed by debt or how much corporate debt influences management of the company's assets.The method is to compare the total debt to total assets.The higher the level of leverage, the smaller or lower the dividends distributed, as the level of leverage indicates that the investee pays off obligations from existing profits, so that the dividends distributed to investors are small.The debt rating will influence the level of net income received by stockholders.This means that the company will finance the debt first, and then the remainder of the profit will be shared as dividends.If management decides to pay off existing debts, the company needs to withhold a large amount of earned profits, thereby making dividends paid to investors smaller.An increase in debt will influence the level of net income received by stockholders.This means that the company will finance the debt first, and then the remainder of the profit will be shared as dividends.(Kasmir, 2017: 112).

Return on Assets (ROA)
Ratio can be used to measure a bank's internal management's ability to obtain profit in a comprehensive manner.A higher ROA (Return on Assets) indicates that the bank has achieved greater profits and has a stronger position in terms of asset utilization.

Some advantages of ROA include:
a) It provides a comprehensive measurement, where the entire financial report is reflected in this ratio.b) ROA is easy to calculate, understand, and interpret as an absolute value.c) ROA is a dominant indicator that can be applied to each responsible organizational unit, answering to the profitability of business units.

Loan to Deposit Ratio (LDR)
LDR is the ratio between long-term debts and own capital.The goal is to measure how much of the company's own capital is being used to guarantee long-term debts, through comparing the amount of long-term debts with the own capital provided by the company.This is because the amount of funds required to finance credits becomes greater.(Kasmir, 2017: 112).
H2: Debt to Equity Ratio (DER) has a negative effect on the dividend policy of banking companies.
H3: Return on Assets (ROA) has a positive impact on the dividend policy of banking companies.
H4: Loan to Deposit Ratio (LDR) has a negative influence on the dividend policy of banking companies.
Research Models can seen in Figure 1 Figure

METODOLOGY
The sample for this study consists of banking companies listed on the Indonesian stock exchange.The sample selection was done using purposive sampling, which resulted in 36 companies meeting the criteria for the study from a population of 43 companies for the years 2019-2021.Regression models This used For test influence variables free in predict condition policy dividend in research .The One Sample Kolmogorov-Smirnov Test (Ghozali, 2016: 154) was used to test for normality.The test was performed by examining the probability values with the following conditions: -If the significance value or p-value is less than or equal to 0.05, the data distribution is not normal.
-If the significance value or p-value is greater than 0.05, the data distribution is normal.
Multicollinearity Test: The multicollinearity test was conducted using the regression method to examine the tolerance level or variance inflation factor (VIF) of each that ROA is influential and positive to policy dividends (H_3) is rejected.An increase in ROA may lead to an increase in the bank's profits, which can be used for bank development or held by the bank, resulting in a lower dividend payment to shareholders.d) Loan To Deposit Ratio (LDR) Based on the analysis, it can be concluded that the Loan to Deposit Ratio (LDR) variable is not influential on policy dividends (DPR), as the hypothesis (H4) stating that LDR is negatively influential on DPR is rejected.The study suggests that the LDR variable does not have a significant impact on dividend payouts, and the bank's ability to pay back depositors' withdrawal depends on the credit given as a source of liquidity.A high LDR ratio may indicate a higher risk in investing, and an increasing LDR ratio from year to year may indicate low liquidity levels and may lead to a loss of confidence in the concerned bank.However, the study found no evidence that changes in LDR affect dividend payouts to shareholders or investors.

CONCLUSION
Capital Adequacy Ratio (CAR) has a negative effect on Policy Dividend (DPR) as an increase in CAR results in a decrease in DPR due to the bank holding capital for development purposes instead of paying higher dividends to shareholders.Debt to Equity Ratio (DER) has no influence on policy dividends as changes in DER do not affect the DPR, and investors do not consider debt usage or return as important factors when investing in a company.Return on Assets (ROA) has a negative impact on policy dividends as an increase in ROA results in more profit for the bank to use for development purposes, reducing the amount of dividends paid to shareholders.Loan to Deposit Ratio (LDR) has no influence on policy dividends as changes in LDR do not affect the DPR.The LDR describes a bank's ability to pay back deposits with credit as a source of liquidity, and a high LDR can indicate a riskier investment with a potential impact on the bank's reputation and share dividends.