The Mediating Role of Profitability in the Relationship between Free Cash Flow, Investment Opportunity Set, and Dividend Policy: Empirical Evidence from Property and Real Estate Companies Listed on the Indonesia Stock Exchange

Abstract

This study aims to examine the influence of free cash flow and investment opportunity sets on dividend policy, with profitability serving as an intervening variable in property and real estate companies. Using a purposive sampling technique, the study obtained 54 observations from 9 companies, and the hypotheses were tested using path analysis. The results reveal that free cash flow has a negative effect on dividend policy, whereas investment opportunities have a positive effect on dividend policy. Furthermore, profitability is not found to mediate the relationship between free cash flow, investment opportunity sets, and dividend policy. These findings suggest that companies may decide to distribute dividends regardless of the level of free cash flow available or the investment opportunities they possess, indicating that dividend distribution decisions are influenced by factors beyond profitability and internal investment considerations.