Moderating Effects of Debt and Dividend Policy on the Relationships Between Ownership Structure Variation and Firm Investment Inefficiency in Indonesia

This article investigates the moderated-interaction effects of dividend and debt policies on the association between ownership structure and firm investment inefficiency in the Indonesian stock market.The study employs Panel Moderated Regression Analysis to analyze 605 firm-year observations spanning from 2009 to 2019.The findings of this study showed that both the ownership structure of the largest shareholders and the second-largest shareholders have a notable positive impact on firm investment inefficiency.In addition, the moderated-interaction effect of debt policy weakened the correlation between the ownership structure of the largest shareholders and firm investment inefficiency.Meanwhile, the study reveals that the dividend policy has an insignificant moderated-interaction effect on the relationship between the ownership structure of the largest shareholders and firm investment inefficiency.On the other hand, debt policy is identified as an effective control mechanism for mitigating agency conflicts in Indonesia.These findings emphasize the importance of debt policy to be considered by the firms' managers when designing the investment policy in the Indonesian stock market.