Determinants of Market Reaction to Dividend Announcements: The Case in Indonesian State Owned Enterprises

Indonesia State Owned Enterprises have significant contribution to the Indonesian economy. Therefore, this study focuses on determinants of Indonesian market reaction to dividend announcement. Sample of the study consists of Indonesia State Owned Enterprises, listed in Indonesian Stock Exchange, that has been announcing the dividend payment during 2005–2012. Independent variables of this study consists of change in dividend payment, growth, leverage, return on assets and size; and the dependent variable for the study is return on firms share at the announcement date (t ₀) and five days around announcement date (t ₋₂, t ₊₂). The result of the study shows that the change in dividend payment has a positive effect on the market reaction. Growth has negative effect on the market reaction to dividend announcement by Indonesian State Owned Enterprises and Return on Assets positively affects market reaction.