Dividend Policy, Financial Constraint, and Cost of Capital

This paper investigates the relationship between divided policy and cost of capital, with financial constraint as a moderating variable. The measurement of cost of capital includes WACC, cost of debt, CAPM and dividend yield. We emply data of financial statement from 385 firms of the Indonesia stock exchange for the period between 2000 and 2019, resulting of 7700 firm-years. The paper finds that there is significant association between dividend and cost of capital. While firms with higher financial constraint bear higher cost of capital. In addition, by interacting dividend and financial constraint, those variables also show the significant association with cost of capital.