| Summary: | This thesis aims to test the agency theory in Indonesian capital market was
proxied by the variable mechanism controlling the agency conflicts. Dividends, debt
and institutional ownership through a hypothesis was developed in this study. The data
used in this study is secondary data drawn from the Osiris database, ICMD. It is
industrial company, excepted insurance companies and financial services that meet the
criterian sampling and it was listed on the Indonesia Stock Exchange (BEI). The data is
in the form of pooled data with the observation period from the year 2004-2010.
Variables used in this study to unity up to the third hypothesis is that the company's
performance to the performance of utility assets and Tobin's q accounting for market
performance as a proxy for agency conflicts as well as the dependent variable. As for
dividends, debt, and institutional ownership as independent variables and firm size as a
control variable. The fourth hypothesis using structural equations with endogenous
variables consisting of dividends, debt and institutional ownership. While the
exogenous variables consist of firm size, growth, profitability ratio both of return on
equity and ratio on assets, fixed assets, investments. The method of analysis used in
this study is multiple regression analysis, and Two-Stages Least Square (2SLS). The
results of this study is the dividend has a positive effect on performance. Debt
negatively affect performance so that the second hypotheses are not supported. Later,
institutional ownership has a positive effect on performance. Simultaneously of
relationship between the three models are not significant. However, the relationship
between dividends and significant at the level of debt. That is, dividends can replace
debt and vice versa to control the agency conflict. Thus, both have substitution
relationships in the play function of binding and oversight of agency conflict.
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