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Managerial Opportunistic Behavior and Overvalued Equity: The Role of Managerial Ownership and Dividend Policy Jeudi Agustina Taman Parulian Sianturi1, Diana Hashim Syarif2, Sugeng Wahyudi3 1 Ph.D Program of Finance at Diponegoro University, Semarang (jeudisianturi@yahoo.coid) 2 Ph.D Program of Finance at Diponegoro University, Semarang ( 3 Lecturer at Diponegoro University, Semarang ABSTRACT This study aimed to test the concept of managerial opportunistic behavior in the perspective of agency theory, as one of the causes of overvalued equity. Their relationship will also be further strengthened by their managerial stock ownership and dividend policy. Research related to opportunistic managerial behavior and overvalued equity is still very limited, especially newly done in developed countries with the object of research involving several industrial sectors. This study takes the object at the manufacturing companies in Indonesia to determine the impact of

opportunistic managerial behavior on overvalued equity, and also the role of managerial ownership and dividend policy in managerial opportunistic behavior and overvalued equity relationship. Keywords : Opportunistic Managerial Behaviour, Overvalued Equity, Managerial Ownership, Dividend Policy 1. Introduction The term of the overvalued equity became popular when Jensen (2005) noted several leading companies went bankrupt and the senior executives are forced to go to jail to account for what has happened to the organization. As a result, the companys reputation to be bad and investors and communities are forced to suffer a loss so great. This situation happens in fact is not fully carried out by senior executives, but because the system is formed from scratch can prey on anyone who enjoys everything that exists in the system and will become worse when managers or executives involved in damaging the system. The involvement of managers who contributed to the system from the start has

been bad so-called opportunistic managerial behavior. Opportunistic behavior committed by the manager turned out to have contributed to misinformation and manipulation leading to overvaluation. It will sharpen the stock price of a company and in the end will be very difficult for companies to improve overvalued equity. This situation has occurred in the company Enron, where the stock price is actually $ 30 billion, but it is considered too high at $ 70 billion. Therefore, in anticipation of a difference of $ 40 billion, the companys managers will increasingly destroying Enron by fooling the market through earnings management. The action taken by Enron managers have actually been speculated by risking their critical assets that Enrons reputation in the form of integrity. As a result, these companies would not be believed anymore by the market and ultimately the worst that will happen is the decline of the company in bankruptcy. In addition to the company Enron, there are again some

other leading companies, such as Xerox, Worldcom, Global Crossing, Vodafone, Nortel, HealthSouth, Lucent, Tyco, Ahold, Royal Dutch Shell, Computer Associates, and many others. Some companies that are clear examples of that happening overseas, while samples few companies in Indonesia include PT Aden Alfindo, PT Kimia Farma, PT Indofarma and PT Perusahaan Gas Negara. Actually, opportunistic behavior is an implication application of agency theory can lead to negative things in the form of efficiency. This happens because the agency has more financial information than the principals (information superiority), while the principals of utilizing their own personal interests or The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 15 group because it has advantages of power. Differences different interests this gives a lot of problems, especially in matters of agent that led to the emergence of agency fees (agency cost). Jensen, et al (1976)

define agency costs are the costs associated with monitoring the actions of management in order to ensure that such action is consistent with the contract between managers, shareholders and creditors. To reduce such costs there are several ways to do that is by monitoring, contracting and bonding (Jensen et al., 1976). But apparently some way in the form of managerial ownership and dividend policy even further strengthen managerial opportunistic behavior in overvalued equity increase. This is consistent with what is stated by Eisenhardt (1989) that the agency theory using three assumption of human nature, namely 1) general human selfishness (self interest), 2) human beings have the power of thought are limited regarding the perception of the future (bounded rationality) and 3) humans have always avoid the risk (risk averse). Based on the assumption that human nature, it is quite clear that the manager will act opportunistic in maintaining overvalued equity in order to obtain benefits

for their personal interests. This study tries to memgambarkan and make the proposition that managerial ownership and dividend policies to strengthen connections with the managerial opportunistic behavior overvalued equity. This paper is divided into four parts. The first part contains an introduction. The second section provides a review of the literature. The third section is a discussion. The fourth part is the conclusion 2. Literature Review This study refers to the framework of agency theory (Jensen and Meckling, 1976) where the manager that seeks to maintain the condition of overvaluation led to a conflict of interest between stakeholders and managers. The motivation is a manifestation of opportunistic attitude to satisfy personal interests in the form of bonuses or stock options contracts (Watts and Zimmerman, 1990). The manager will strive to meet and exceed the predictions of analysts and market expectations in order to see the performance of equities looks good. As a result,

the companys market value will soar (overvalued). Based on the hypothesis of overvalued equity of Jensen (2005), which suggests that the manager did the creation of value for maintaining an overvalued condition through the practice of earnings management. and agent is assumed as having a rational economically motivated by personal interests and their differences in taste preferences, beliefs and information. This theory became more popular when Jensen and Meckling (1976) published the results of his research on the theory of the firm (theory of the firm). Jensen et al explain the agency relationship in agency theory (agency theory) that the company is a collection of contract (nexus of contract) between the owner of the resource costs (principal) and the manager (agent) who took care of the use and control of these resources. Meisser, et al., (2006: 7) confirmed that the agency relationship has resulted in two problems: (a) the occurrence of asymmetric information (information

asymmetry), where management generally has more information about the financial position and the actual position of the operating entity of owner; and (b) conflicts of interest (conflict of interest) due to inequality of the goal, where management does not always act in the interests of the owners. There are two types of asymmetric information is adverse selection and moral hazard. Adverse selection is a type of asymmetric information in which one or more actors business transactions or transactions that potentially has more information on the others (Scott, 2000). Inequality enterprise information knowledge this may cause problems in capital market transactions as investors do not have sufficient information for making the decisions. While moral hazard is a type of asymmetric information in which one or more business actors or potential transactions that can observe their activities in full compared with others (Scott, 2000). This moral hazard problem occurs because the parties

outside the company (investor) delegate duties and authority to the manager but investors are not able to fully monitor the managers in carrying out the delegation. In an effort to overcome or reduce this problem then arises agency agency costs (agency cost) will be borne by both the principal and the agent. Jensen and Meckling (1976) share the costs of this agency be monitoring costs, bonding costs and residual loss. Monitoring costs are costs incurred and borne by the principal to monitor the agents behavior, which is to measure, observe, and control the behavior of the agent. Bonding costs are incurred by the agent to set and adhere to a mechanism that ensures that the agent will act in the interests of the principal. Furthermore, residual loss is a sacrifice in the form of reduced principal prosperity as a result of the differencemaking agent and principal decisions. 2.1 Agency Theory 2.2 Opportunistic Behavior This theory is a branch of science that is derived from neoclassical

economic theory of Adam Smith (1776). Smith explained that the company manager who is not an owner of the organization, can not be expected to give a good performance in accordance with the purpose of their owners. Principal Monitoring of the company can be done from outside and inside the company. One form of monitoring of the company is the managerial ownership. The ownership structure manager is the percentage of shares owned by the manager and this The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 16 structure can align the interests of owners with the manager, so that in the implementation of the companys performance to run well. In addition, managers will definitely feel the direct benefits of the decisions taken correctly and feel the loss as a consequence of making the wrong decision. As for knowing who the manager who owns shares in companies that are listed in the Board of Directors. Crutchley, et al. (1989), Bathala, et al

(1994) concluded that the level of higher managerial ownership can be used to reduce the agency problem. However, the percentage of managerial ownership can reduce agency costs, is still a debate. According to Demsetz, et al. (1985), the percentage of managerial stock ownership by 0-13% still give the general managers behavior (still reasonable) and can increase their stockholding; for a percentage of 13% -50% will have a positive influence on the performance of companies; whereas the percentage was above 50% give a negative effect for the companys performance. This means that the managerial stock ownership above 50% will no longer be a way in reducing agency costs. Forms of contracting in agency costs are in the form of adequate compensation is given hopefully will be able to opportunistic behavior. an effort to reduce bonuses, salaries or to the manager so reduce managerial Bonding is a monitoring mechanism that includes corporate governance, debt policy and dividend policy.

Dividend policy decisions regarding the distribution of profit that is the percentage of earnings that should be held as retained earnings and a percentage of profits to be distributed as dividends to shareholders. Agency theory explains that dividend payments may reduce the problems associated with information asymmetry. Dividends may also serve as a mechanism to reduce the cash flow that is under the control of management, thereby helping to reduce agency problems. Reducing funds under managements discretion will generate a force that encourages managers to more frequently into the capital markets, so put them under close supervision from the suppliers of capital (Rozeff, 1982, and Easterbrook, 1984 ). Many researchers have provided empirical support to the explanation of the agency as an answer to the question why companies pay dividends, which are Rozeff (1982), Lloyd et al. (1985), and others Meanwhile, other researchers such as Denis and Sarin (1994) provide little support or

reject this view. 2.3 Overvalued Equity Overvaluation is a size at which the value of the company is overvalued. If it continues in the long term will give an undoing of the company. This occurs because the system is broken coupled with managerial opportunistic behavior. It was originally a high value company that seems to give a positive signal to investors and raise the reputation of the manager, but in the long run it will only give destruction for the company. Shareholders will suffer enormous losses and is more ironic is the public also will suffer (Jensen, 2005). To further ease in understanding the overvaluation, Jensen (2005) described it as heroin. People who use heroin initially felt "happy" but over time gives the suffering that led to the death. Managers provide mis-information in order to maintain the sustainability of overvaluation conditions through the creation of value that can provide growth illution to meet the expectations of the market. Actually, the

most important part that makes a problem on this overvalued is situated at an early stage overvalued equity, where the manager and the board receives the wrong signal from the market. Just like an addictive drug, which the CEO or CFO as the holder of the wheel of an overvalued company will initially be flattered because the companies they manage impressed give a positive signal to investors. Shares of companies that seem to be high before, will be favored by investors and it will be very easy for a company to enter the capital market. The stock price is overvalued earlier known by the manager will be very difficult to produce a performance that can provide justification for the share price. The manager must be aware that the market will hit unless the companys performance can justify the stock price to its true value. But after all alternatives to create value taken and very difficult to justify the value of the company to its true value, then the manager will start to take actions

that undermine long-term value by playing a result of the expected market performance in the short term. By doing this means that the manager actually has been biding time to find ways to overcome the problem and will eventually lead to bankruptcy and the problems that occur as described previously. Some of the efforts made by managers in resolving the problem is 1) the manager use that equity is too high, to create long-term value destroying acquisitions, 2) The manager used his access to the debt that is low cost and equity capital to engage in spending excessive internal and risky investment net present value is negative where the market thinks will generate value; 3) and finally the manager will rotate further in accounting manipulations and even fraudulent practices to continue the appearance of growth and value creation. None of these measures really improve performance. In fact, they destroy part or all of the companys core values. But, what else alternative should be taken

again by the manager? Jensen (2005) acknowledges that it is difficult to address the issue of equity is overvalued and still do not have a solution that can solve this problem well. But Jensen believes that the solution to the problem of "massive overvaluation" is to quit early when there are symptoms of impending equity overvaluation. Though this means it will overcome the reluctance of people to The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 17 survive out in the short term in order to get long-term benefits. So the point is the manager should refuse to play in the game of earnings management. 2.4 Managerial Ownership Information and Asymmetric Managerial ownership is measured in proportion to the shareholding held by the managerial (Iturriaga and Sanz, 1998). Gaver and Gaver (1993) which states that the management company which grew receives a large part of compensation in longterm incentive salary, while the

management company that does not grow received a large part of their salary in the form of fixed salary. In connection with the companys growth and compensation policy, Smith and Watts (1992) find companies that grow (growth firms) pay a higher salary level to top management and selecting a compensation package that emphasizes incentive compensation. This is consistent with Iturriaga and Sanz (1998) which states that the relationship of managerial ownership structure and value of the company is a non-monotonic relationship. Non-monotonic relationship arising due to the incentives of managers and they are trying to do the alignment of interests with outsider ownership by increasing their shares, if the value of the company increases. Results of research conducted also supported the statement Jensen and Meckling (1976) which states that one way to reduce agency cost is to increase ownership by management. The proportion of shareholding controlled by the manager can influence company

policy. Managerial ownership will align the interests of management and shareholders (outsider ownership), so it will benefit directly from the decisions taken and suffer losses as a consequence of making the wrong decision. The statement states that the greater the proportion of management ownership in the company, management tends to be more active for the benefit of the shareholders who incidentally is himself. Managers earn wages and other incentives from the company because it represented the owner of the company in making decisions. In this case, a manager is an agent acting on behalf of its shareholders (principal). If the decision makers is not an owner of the managerial decision will be influenced by factors other than the welfare of the owners of the company. This is the origin of agency problems. The agency problem is certainly not desirable because it creates an inefficient allocation of resources. This led to the welfare owner Ketidakefisiensi reduced. The disadvantage of

this is the cost of the agency. This agency fees hurt the company because it causes a decrease in the value of the company. Agency theory told by Jensen and Meckling (1976) stated that generally all shareholders included in the management level has its own interests. However, Demsetz and Villalonga (2001), which examines two dimensions of the shareholding which the five largest shareholders and managerial ownership, expressed a different opinion. According to Demsetz and Villalonga (2001), which has a position as a member of the board could be because he has or represent someone outside the company who own the companys stock in large quantities. Members of the board like this, do not have the same interests as the manager of the company. However, conflicts of interest can arise if investors outside the company have a vested interest on the company. Hypothesis alignment of interest expressed by Jensen and Meckling (1976) in Chen et al. (2003) stated that the actions and decisions made

are nonvalue maximizing arise when managers have company stock in very small quantities. When the number of managers increased share ownership, managers have an interest, so that actions are more managers maximizing value. This action causes an increase in the value of the company. Entrenchment hypothesis put forward by Stulz (1980) in Chen et al. (2003) states that the higher managerial ownership which will lead to a decrease in the value of the company. Managers who have a large number of shares that would tend to entrench the position. As a result, decisions are nonvalue maximizing that value of the company declined Jensen and Meckling (1976) revealed that the structure of equity ownership important influence on managerial incentives and the value of the company. They argue that managerial ownership can reduce the incentive to consume luxury manager, suck shareholder, or engage in behavior that is not maximizing the value of the other. This argument is known as hypothesis pooling of

interest (convergence of interests hypothesis). Hypothesis managerial selfinterest (Brailsford et Al, 1999) or hypotheses managerial entrenchment (Friend and Lang, 1988) reveals that when faced with the opportunity, managers who do not like risk will be more incentivized to lower the risk of job loss that can not be diversified by ensure the survival of the company. This is because they bear the burden of risk that can not be avoided on the wealth of companies that employ them. However, if the manager initially have had a significant portion of the equity of the company, the increase in managerial ownership can lead to the strengthening of the position of the manager and lowering debt levels (McConnell and Servaes, 1995). The decrease is due to the debt level managers who are strong position in the company will consider the careful choice of the level of corporate debt (Berger et. Al, 1997) Managers may prefer a lower level of debt than it should because of their desire to reduce the

risk of companies to protect their capital resources, or dislike them against the pressure of performance arising from the use of cash commitments in large numbers. McConnel and Servaes (1995) found that non-linear relationship between managerial ownership and corporate performance. The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 18 2.5 Dividend Policy Agency theory says that the dividend mechanism providing incentives for managers to lower costs associated with a principal-agent relationship. Pay greater dividends will reduce internal cash flows related to management policies and forcing companies to seek more external funding. So the dividend payment can be used as a tool to monitor and account management performance. Several empirical studies support the agencys explanation dividends. For example, Rozeff (1982) in the Baker and Powell (1999) found support for the role of dividends to break back in agency costs in companies

controlled by minority managers. This analysis shows a negative correlation between the percentage of dividend payments by insiders. With the percentage of outsiders lower will result in fewer requirements to pay dividends in reducing agency costs. Crutchley and Hansen (1989), and Mohd Perry and Rimbey (1995) in Baker and Powell (1999) concluded that managers make financial policy gaps such as paying dividends to oversee the agency fee. Furthermore, Rozeff (1982) suggests that dividend payments is one way to reduce agency cost of equity due to a conflict between management and shareholders will be reduced. With dividend payments indicates that the management manage the company well and can be a positive signal for our shareholders for reinvestment in the company. Rozeff (1982) and Easterbrook (1984) explains that the dividend payments will reduce the sources of funds controlled by the manager, thus reducing the power manager and make dividend payments similar to monitoring capital

market happens if the company obtained new capital from external parties, thus reducing agency fees. Riding (1994) suggests that dividend payments indicates a transfer of wealth from shareholders to debtholders. Jensen (1986) suggest that managers and shareholders are always different interests known to the agency conflict. Furthermore, Jensen stated that one of the problems between managers and shareholders are shareholders of preferred dividend payments rather than reinvested, while the manager is the opposite. Pecking order theory states that the company prefers to use funds from the internal (Myers, 1984). With the funds from internal sources makes the company does not have the burden to pay dividends at the end of the period. According to Myers and Majluf (1984) found a decrease in dividend payment would cause the company to have an internal source of funds for investment. However, when management is involved in the form of insider ownership, then the interests of shareholders

more in line with the interests of managers. The suitability of this interest occurs because the manager will also get back on its holdings in the form of dividends that the conflict within the company can be reduced. 3. DISCUSSION 3.1 Managerial Opportunistic Behavior with Overvalued Equity Moderated by Managerial Ownership Agency relationship is a contract between principal and agent. The core of the agency relationship is the separation of ownership (in the principal or investor) and control (in the agent or manager). Investors have hope that the manager will produce a return on the money they invest. Therefore, a good contract between the investor and the manager is a contract that is able to explain what are the specifications that should do managers manage funds investors, and the specifics of the distribution of returns between managers and investors. Agency theory seeks to answer the agency problem happens if the parties working together have a purpose and a different

division of labor. Eisenhardt (1989) states that the agency theory focuses on solving two problems that occur in the agency relationship, namely: a) The issue will increase when: 1. The desire and goal conflict between principal and agent. 2 It is very difficult and expensive for the principal to verify employment or actual behaviors performed by the agent with the right. b) The issue of different risk sharing in the face of risk. Principal and agent may choose different actions because of differences in risk preference. Currently the issue of agency theory is to solve the conflict between the owner and the manager in control of enterprise resources (Jensen 1986, 1989). Furthermore, the use of contract will show the allocation decisions and incentives. The manager has a number of incentives to pursue growth-oriented strategy options. In general it can be said that the growth will lead to increased shareholder welfare. From an economic perspective the industry, market competition

function push product prices towards minimum average cost. This causes managers have an incentive to improve the efficiency of the organization in order to improve cash flow. According to Jensen (1986), the problem here is how to control manager, so that they can generate more cash flow to the investor than investing it into projects with a return below the cost of capital. The improved cash flow can be used to finance the projects with positive net present value discounted at the cost of capital of the company. Contract suggested by agency theory to complete the transfer of the welfare of the organization to the investor is debt creation (Jensen 1989). Debt managers can bind with a promise to pay the cash flows in the future. The achievement of a number of cash flow from the investment manager will The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 19 create incentives for the agreement has been made between the owner and the manager.

This will encourage managers to improve the effectiveness of the organization to improve incentives. Debt also has meaning as a control tool against opportunistic behavior managers reduce existing cash flow for diskresionari expenditure. When debtholder lend some funds to the company, debtholder will monitor each companys decision whether making an investment decision that is favorable or not. This will encourage companies make investment decisions that can benefit the debtholder to reduce the cost of debt. Agency theory also has important implications for the relationship between shareholders and debtholders. Shareholder interested in a return that exceeds the amount of the repayment, while debtholder only interested in debt payments in accordance with the agreement. Shareholder sometimes more interested in pursuing business activities that are riskier than debtholder. At the time this happens, debtholder may change the price of debt capital becomes higher and held a greater measure

of control to prevent top managers of investment capital at risk (Simerly and Li, 2000). When this can not eliminate agency costs, debtholder will not invest in companies whose business activity is risky. From a corporate perspective, the higher the cost of debt capital can lower interest shareholders, and the higher the external control by debtholders may disrupt the companys ability to effectively move their business in a competitive environment. This indicates that the company wants to do business at risk for opportunistic managerial behavior. This means that the manager will seek to increase the value of the company in order to please the shareholders, without prejudice to its own interests. As a result, in the short term, the manager will invest in projects that anywhere (no matter whether giving the net present value is positive or negative). This is done so that the impression appears that the manager has done a good performance. Investors and other capital owners will find that

the agency has worked well and will certainly get a bonus or incentive. Moreover, if the manager also has a stake in the company, it will further strengthen managerial opportunistic behavior in increasing overvalued. The manager who is also a principal would have thought that he would get a double result, namely incentives and higher corporate value. Based on the above description it can be formulated propositions statement of managerial opportunistic behavior is a behavior that managers who aim to make a profit that is more advantageous than having to think about the interests of his principal. Moreover, if the manager has a stake, would be increasingly encouraged to increase the companys value and the result is the occurrence of overvalued equity. The piktografis models that can be built from Managerial the statement of the proposition can be seen in Figure 1 below: Opportunistic Managerial Behavior 3.2 Overvalued Equity Managerial Opportunistic behavior with Overvalued Equity

moderated by Dividend Policy Agency theory as quoted Ammihud and Lev (1981) revealed that, managers as agents of the shareholders, not always act on behalf of the interests of shareholders for the purpose they are different. On the one hand the welfare of shareholders solely depends on the market value of the company. On the other hand, wealth managers are very dependent on the size and risk of the bankruptcy of the company. As a result, managers are interested to invest in order to increase growth and decrease the risk of the company through diversification, although perhaps this is not always enhance shareholder wealth. Grand Jammine research results and Thomas was quoted as saying by Bethel, and Julia (1993), shows that managers of public companies tend to expand and diversify the company, although it does not increase the value of the company. Usually diversified business is done through the purchase of real assets that do not fit with the core business of the company. Sicherman

and Pettway (1987) proved that, the potential for inefficiencies resulting from a diversified real estate assets instead of concentration of assets. Assuming that the owner of the company is not directly involved in the management of the company and the manager is a person who is paid to operate the company, then the manager is operationally independent work in spite of the intervention of the owner, except in determining public policy. Based on these assumptions, it is possible that managers use the funds available for investment are excessive, as this will improve the welfare of the distributing it to shareholders. Managers as agents of shareholders will take appropriate action to maximize its own interests only if there had been no other incentive or not monitored. When this happens of course would not be consistent with the objective of maximizing the value of the company (Mann & Neil, 1991). Jensen argues that managers of public companies have an incentive to expand the

company beyond the optimal size, although the expansion is done on the project which has a net present value (NPV) is negative. Overinvestment conditions is performed using internal funds generated by the company in the form of free cash flow. Problem free cash flow refers to the activity manager who prefers to invest (although with a negative NPV) of the divide in the form of dividends. The argument relating to the The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia Ownership 20 agency theory reveals that financial restructuring, financial restructuring, companies can increase the value of the company by taking cash (free cash flow) from the hands of the manager and pay it out to shareholders as dividends. It may decrease the ability of managers to expand and diversify the company in excess in the future and force managers to further improve the efficiency of the operation, even if allowed by selling unprofitable business units (Jensen

& Murphy, 1990). Research on agency cost and dividend payment behavior of companies, Rozeff (1982) states that the payment of the dividend is a part of the monitoring companies. In such conditions, companies tend to pay greater dividends if the insider has a lower proportion of shares. Rozeff (1982) and Easterbrook (1984) stated that the payment of dividends to shareholders will reduce the sources of funds controlled by the manager, thus reducing the power manager and make dividend payments similar to monitoring capital market which happens when companies acquire new capital. Jensen (1987) states that the payment of dividends to appear as a substitute for debt in the capital structure to oversee the behavior of the manager. Companies that have a high dividend payout prefer funding with their own capital, thereby reducing the cost of agency debt. Payment of dividends may be made after liabilities to interest payments and debt repayments are met. The existence of such obligations,

will make managers act more carefully. If seen relations opportunistic managerial behavior and overvalued equity dividend policy moderated by the more powerful. This means that the dividend policy in the form of payout ratio, it will lure investors to increase the value of the company. In this case the manager will do everything to increase the importance, despite the fact that the dividend policy will be able to reduce opportunistic behavior. However, since it is conditional that the manager will seek in any way to increase the value of the company (there was overvalued equity) in order to receive bonuses or incentives of shareholders. Another possibility is also expected by the manager that he is getting a good reputation of the shareholders or investors. Based on the description above, it can be formulated statement propisisi of the dividend policy is as one angler to investors or shareholders to be able to raise the companys value, while managers to pursue its interests would

melaklukan any action, as long as it can enrich itself without thinking of principal. The models piktografis statement this proposition can be seen in Figure 2 below: Opportunistic Managerial Behavior Overvalued Equity 3.3 State of The Art State of the art of this study is still a lack of researchers who use managerial ownership and dividend policy in moderating the relationship between managerial opportunistic behavior and overvalued equity. In addition, the proxy used for managerial opportunistic behavior is asymmetric information, whereas a proxy for equity is overvalued RKVE (RKV-Evaluation) who are not so widely used in Indonesia as a measurement. 3.4 Theoritical Basic Model Theoretical basic model built on the basis of propositions or concepts proposed. Proposition or concept of managerial ownership and the dividend policy is proposed to moderate the managerial opportunistic behavior and overvalued equity. The consideration of the submission of the proposition is based on the

following arguments: a) Managerial ownership is supposed to be one of the efforts in reducing agency costs and increase the value of companies it can only be a moderation strengthens the connection opportunistic behavior managerial overvalued equity as a proxy of the companys value and measured using RKV-Evaluation is still new and not so widely used in Indonesia, b) Dividend policy is one way that is done in reducing agency costs, but in moderate managerial opportunistic behavior and overvalued equity will further strengthen the relationship. So not weaken the relationship between the two, c) Managerial ownership and the dividend policy is considered to be a moderating variable that strengthen relationships and managerial opportunistic behavior dividend policy as seen from a managerial perspective is negative and quite rational. Piktografis proposition model describes the relationship between managerial opportunistic behavior and overvalued equity moderated by managerial ownership and

dividend policy (figure 3). Based on the model piktografis basic theoretical propositions then the model can be described as follows: Managerial Ownership Opportunistic Managerial Behavior Overvalued Equity Dividend Policy 3.5 Hypothesis Development The hypothesis can be developed based on the assessment of each issue theoretically and empirically. Study of theoretical and empirical problems can be Dividend Policy The 2017 International Conference on Management Sciences ( ICoMS 2017) March 22, UMY, Indonesia 21 divided into three relationships between concepts, namely: (1) managerial opportunistic behavior and the value of the company; (2) managerial ownership as pemediasi between opportunistic behavior and the value of the company; (3) the dividend policy as pemediasi between managerial opportunistic behavior and the value of the company. The hypothesis for the three relationships between concepts are: 1) H1 = higher managerial opportunistic behavior, the higher overvalued

equity 2) H2 = Managerial ownership will strengthen relationships with the managerial opportunistic behavior overvalued equity 3) H3 = dividend policy will reinforce relationships managerial opportunistic behavior with overvalued equity 3.6 Empirical Research Model Based on the hypothesis statement 1 to 3 above, can then be arranged or combined in an empirical research model presented in Figure 4 below. Managerial Ownership H1 H2 Opportunistic Managerial Behavior Overvalued Equity H3 Dividend Policy mentioned earlier as companies that have overvalued equity then later the object of this research are companies belonging to the manufacturing industry that have met predefined criteria sample. 4. CONCLUSION Conceptual research conducted by propositions are built, can describe managerial opportunistic behavior would be stronger in overvalued equity increases when moderated by managerial ownership and dividend policy. In addition the study aimed to gain clarity about the effects of

opportunistic behavior managerial against overvalued equity, ability to share ownership managerial in moderating influence of opportunistic behavior managerial against overvalued equity, and the ability of the dividend in the moderating influence of opportunistic behavior managerial against overvalued equity will be described correctly. The limitation of the research is not processing the data yet, that may provide a research that can answer questions on the issue of research studies that have been formulated. Therefore, further research is expected separately in order to proceed with the processing of the data to be able to prove oprtunistik managerial behavior will be stronger in overvalued equity increases when moderated by managerial ownership and dividend policy this. References Figure 4 above is a model of empirical research in elaboration of the basic theoretical models proposed (the proposed grand theoritical model) already cited study the relationship between theoretical and

empirical variables have been addressed in the development of hypotheses. This empirical research models using primary basic theory in explaining the relationship Agency managerial opportunistic behavior toward overvalued equity moderated by managerial ownership and dividend policy. The empirical model mathematically be written as follows: Y = a + b1 X1 + b2 X2 + b3 X3 + b4 X1X2 + b5 X1 X3 +e where: Y = overvalued equity X 1 = Opportunistic Managerial Behavior X 2 = Managerial Ownership X 3 = Dividend Policy Next to the model of overvalued equity is : m it = α 0jt + α 1jt b it + α 2jt ln (NI) it + α 4jt LEV it + ε it If the MV / BV ≥ 0, indicating overvaluation and if the MV / BV ≤ 0, indicating undervaluation. Furthermore, referring to examples of companies that have been Matthew, R., David, T, R, and S Viswanathan, 2005, Valuation Waves and Merger Activity: The Empirical Evidence, Journal of Financial Economics, Vol.77p561-603 Amihud, Y., dan B Lev, 1981, “Risk Reducction

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