An Empirical Study on The Determinants of The Capital Structure Listed in Indonesian Manufacturing Firms For The Period 1995 - 2000

Abstract

Sukarno, MIndra. (2005). An Empirical Study onThe determinants of The Capital Structure of Listed Indonesian Manufacturing Firms for The Period 1995 - 2000. Yogyakarta. International Program, Faculty of Economics. Islamic University of Indonesia. By developing the capital market and theoccurring of crisis, it is affect the changed of ownership structure and capital structure of Indonesian firms. Issues, such as how the firms finance their project, how much they use debt and equity financing, and what are the factors behind existing capital structure decision are not well understood. The maturity of the Indonesian markets motivated the researcher to study the determinants of capital structure for manufacturing Indonesian firms. This study focused on investigating the determinants of capital structure of listed manufacturing Indonesian firms. Tin's study uses leverage or capital structure as dependent variable which can be defined as book value of long term debt divided by sum of equity and book value of long term debt. Then, as independent variable proxy are profitability, growth, tangibility, firm size, market to book, business risk, agency and non debt tax shield. This study uses ML- ARCH (Maximum Likelihood) method and multiple linear regression model. This study indicates that profitability and agency have significant negative influence on leverage, then firm size, market to book, non debt tax shield significant positive influence on leverage. Meanwhile, growth, business risk and tangibility are identified to have positive influence on leverage but not significant.