State ownership, corporate missions and accountability of dividend policy: Empirical evidence of state-owned enterprises governance

In the Indonesian context, state-owned enterprises (SOEs) are established to serve dual conflicting missions, namely: commercial and social-economy. This research hypothesized that the SOE mission’s focus (i.e., the single commercial mission versus the dual mission) affects SOE policy to pay dividends to the state as controlling owner. The sample is 52 SOEs covering the years 2009 to 2015, resulting in 364 firm-year observations which are grouped into the single commercial mission and the dual mission (Rossieta et al., 2019). The hypotheses are tested using unbalanced panel data and regression statistics. Consistent with the hypotheses, the results suggest that the association between net income and dividend level on the single commercial mission SOEs is stronger compared to the association on the dual mission SOEs. Empirical evidence also shows that the SOE’s mission type weakened the association. Presumably, the state as controlling owner perceived social-economy contribution as some form of return on investment, besides dividends as one source of the state revenue. For that reason, although the dual mission SOEs pay lower dividends relative to their income level compared to the single mission SOEs, yet, the payment is still considered accountable when referring to the Supreme Constitution and laws regarding the SOE’s mission.