THE ROLE OF FOREIGN OWNERSHIP, INSTITUTIONAL OWNERSHIP, INCOME-EARNING ABILITY, AND PROFITABILITY ON COMPANY CAPITAL STRUCTURE DYNAMICS

Himmiyatul Amanah Jiwa Juwita

Abstract


Capital structure is an essential decision for the company. Capital structure is related to the composition and contribution of the company's funding in operational activities. This study aims to identify and describe the variables that affect the company's capital structure. This study uses a quantitative approach with explanatory research. The analysis technique used in this study is to use descriptive analysis and statistical inferential analysis with multiple regression techniques. The population used is a manufacturing company listed on the Indonesia Stock Exchange. The sampling method used is purposive sampling. In this study, the purposive sampling criteria used included Companies that have conducted an IPO (Initial Public Offering) before 2016 and are listed on the Indonesia Stock Exchange and Companies that have published annual financial reports on the IDX from 2016 to 2020. The research variables used are capital structure, company size, profitability, foreign investor ownership, government ownership, and institutional ownership. The research results show that the variables of company income and ownership investors have no significant influence on the dynamics of the company's capital structure. Meanwhile, domestic institutional ownership and company profitability have an influence which is significant to the company's capital structure. There are differences in power, the influence of variables on the company's ability to generate income, investor ownership, and foreign and domestic institutional ownership between companies with share ownership by foreign investors and companies that only have domestic institutions.


Keywords


Capital Structure; Investment Ratio; Financial Distress; Ownership Structure; Business Risk; Managerial Experience

Full Text:

PDF

References


Antill, S. and Grenadier, S. R. 2019. Optimal Capital Structure and Bankruptcy Choice: Dynamic Bargaining versus Liquidation. Journal of Financial Economics.

Bevan, A. A. and Danbolt, J. 2002. Capital Structure and its Determinants in the United Kingdom - A Decompositional Analysis. Applied Financial Economics, pp. 159-170.

Bhattacharyya, N. and Morrill, C. K. J. 2015. Capital Structure: Theory and Evidence. Social Science Research Network, May. DOI: 10.13140/RG.2.1.3670.4160.

Chen, J. and Strange, R. 2005. The Determinants of Capital Structure: Evidence from Chinese Listed Companies. Economic Change and Restructuring, 38(1 SPEC. ISS), pp. 11–35. DOI: 10.1007/s10644-005-4521-7.

Crutchley, C. E. and Jensen, M. R. 1996. Changes in Corporate Debt Policy: Information Asymmetry and Agency Factors. Managerial Finance, pp. 1-15.

Deepa, R. 2011. A Study on the Determinants of Capital Structure and Profitability. UGC.

De Vries, A. 2010. The Effect of Firm Characteristics and Economic Factors on the Capital Structure of South. Stellenbosch University.

Dewiningrat, A. I. and Mustanda, I. K. 2018. Pengaruh Likuiditas, Profitabilitas, Pertumbuhan Penjualan, dan Struktur Aset Terhadap Struktur Modal. Jurnal Manajemen Unud.

Dhankar, R. S. 2019. Capital Markets and Investment Decision Making. New Delhi: Springer.

Do, T. K., Lai, T. N., and Tran, T. T. 2020. Foreign Ownership and Capital Structure Dynamics. Finance Research Letters.

Doukas, J. A. and Pantzalis, C. 2003. Geographic Diversification and Agency Costs of Debt of Multinational Firms. Journal of Corporate Finance, pp. 59-92.

Ezeonha, A. E. 2008. Firm Size and Corporate Financial-Leverage Choice in a Developing Economy: Evidence from Nigeria. The Journal of Risk Finance, pp. 351-364.

Fama, E. F. and French, K. R. 2002. Testing Trade-Off and Pecking Order Predictions about Dividends and Debt. The Review of Financial Studies, pp. 1-33.

Fama, E. F. and Jensen, M. C. 1983. Separation of Ownership and Control. Journal of Law and Economics.

Kanita, G. G. 2014. Pengaruh Struktur Aktiva dan Profitabilitas terhadap Struktur Modal Perusahaan Makanan dan Minuman. Trikonomika.

Li, K., Yue, H., and Zhao, L. 2009. Ownership, Institutions, and Capital Structure: Evidence from China. Journal of Comparative Economics.

Mahapsari, N. R. and Taman, A. 2013. Pengaruh Profitabilitas, Struktur Aktiva, dan Pertumbuhan Penjualan terhadap Harga Saham dengan Struktur Modal sebagai Variabel Intervining pada Perusahaan Manufaktur di Bursa Efek Indonesia. Jurnal Nomial.

Margaritis, D. and Psilakki, M. 2010. Capital Structure, Equity Ownership and Firm Performance. Journal of Banking and Finance, 34(3), pp. 621–632. DOI: 10.2139/ssrn.2016420.

Mazur, K. 2007. The Determinants of Capital Structure Choice: Evidence from Polish Companies. International Advances in Economic Research, pp. 495-514.

McMillan, D. G. and Camara, O. 2012. Dynamic Capital Structure Adjustment: US MNCs and DCs. Journal of Multinational Financial Management, pp. 278-301.

Mittoo, U. R. and Zhang, Z. 2008. The Capital Structure of Multinational Corporations: Canadian versus U.S. Evidence. Journal of Corporate Finance, pp. 706-720.

Myers, Stewart C. and Majluf, N. 1984. Corporate Financing and Investment Decisions When Firms Have Information that Investor Do Not Have. Journal of Financial Economics, 13(2), pp. 187-222.

Nabila, D. T. and Rahmawati, M. I. 2023. Pengaruh Profitabilitas, Struktur Aktiva, dan Ukuran Perusahaan terhadap Struktur Modal. Jurnal Ilmu dan Riset Akuntansi.

Nhung, L. T. and Okuda, H. 2015. Effects of State Ownership on Companies' Capital Structure and Profitability: Estimation Analysis Before and After the Lehman Shock. Journal of Asian Economics.

Oino, I. and Ukaegbu, B. 2015. The Impact of Profitability on Capital Structure and Speed of Adjustment: An Empirical Examination of Selected Firms in Nigerian Stock Exchange. Research in International Business and Finance.

Ooi, J. 1999. The Determinants of Capital Structure Evidence on UK Property Companies. Journal of Property Investment and Finance, pp. 464-480.

Sawitri, N. P. and Lestari, P. V. 2015. Pengaruh Risiko Bisnis, Ukuran Perusahaan dan Pertumbuhan Penjualan terhadap Struktur Modal. Jurnal Manajemen Unud.

Shen, J. and Yin, X. 2015. Credit Expansion, State Ownership, and Capital Structure of Chinese Real Estate Companies. Journal of Property Investment and Finance.

Serrasqueiro, Z. and Caetano, A. 2015. Trade-Off Theory versus Pecking Order Theory: Capital Structure Decisions in a Peripheral Region of Portugal. Journal of Business Economics and Management, Volume 16, Issue 2, pp. 445–466. DOI: 10.3846/16111699.2012.744344.

Sun, J., Ding, L., Guo, J. M., and Li, Y. 2016. Ownership, Capital Structure and Financing Decision: Evidence from the UK. The British Accounting Review, pp. 448-463.

Thai, A. 2017. The Effect of Foreign Ownership on Capital. Review of Integrative Business and Economics Research.

Vy, L. T. and Nguyet, P. T. 2017. Capital Structure and Firm Performance: Empirical Evidence from a Small Transition Country. Research in International Business and Finance, pp. 710-726.

Zulkarnain, M. 2020. Pengaruh Likuiditas dan Profitabilitas terhadap Struktur Modal. Forum Ekonomi.




DOI: http://dx.doi.org/10.21776/ub.jam.2023.021.04.10

Refbacks

  • There are currently no refbacks.