The Controlling of Ownership on the relationship between Financial Performance and Capital Structure in Indonesia

Abstract

The purpose of the study was to determine the determinants of the firms' capital structure concerning their maximum financial performance. To reach this aim, the data of the financial statements firms of Indonesia were used. As the first method, a Pearson correlation matrix was applied to determine a statistically significant correlation between capital structure indicator (debt-to-assets ratio) and financial performance and ownership of the firms. The analysis used the data panel multiple regression model to assess the effect of these independent and controlling variables on leverage. Some findings are that profitability has positive (ROA) and negative (ROE) effect on leverage. MBV and tangibility do not affect the capital structure, and firm size negatively impacts on it. In this panel analysis, it was confirmed that the managerial and institutional ownership impact on leverage negatively and positively, respectively. By decreasing the sales growth, the debt ratio entity rises, or they have a negative relationship. Based on these findings, it can be stated that financial performances influenced the capital structure.

Keywords: {'name': 'capital structure, leverage, financial performance, ownership, sales growth'}

Authors & affiliations

Nicko Albart
Affiliation not supplied

Bonar Marulitua Sinaga
Affiliation not supplied

Perdana Wahyu Santosa
Affiliation not supplied

Trias Andati
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.1017/S0022109000002751

DOI: 10.18045/zbefri.2016.1.119

DOI: 10.1007/s11294-011-9334-z

DOI: 10.1080/1406099X.2011.10840494

DOI: 10.5195/EMAJ.2014.46

DOI: 10.1016/j.jcorpfin.2015.10.001

Brealey, R., Myers, S., & Marcus, A. (2020). Fundamentals of Corporate Finance (Tenth). Retrieved from https://www.mheducation.com/highered/product/fundamentals-corporate-finance-brealey-myers/M9781260013962.html

DOI: 10.1016/j.iimb.2017.10.002

DOI: 10.1016/j.brq.2016.01.003

DOI: 10.1108/MF-10-2013-0275

DOI: 10.1108/15265940911001385

DOI: 10.1111/j.1540-6261.2012.01735.x

DOI: 10.1590/S1807-76922013000300007

DOI: 10.21511/imfi.15(2).2018.14

DOI: 10.1504/IJBAAF.2019.099430

DOI: 10.1016/j.bir.2018.07.002

DOI: 10.14414/jebav.v22i2.1638

DOI: 10.5296/jmr.v3i1.359

DOI: 10.1016/j.jcorpfin.2015.04.004

DOI: 10.1111/j.1540-6261.1973.tb01415.x

DOI: 10.21511/imfi.14(1-1).2017.12

Lee, P., Wu, M., & Shen, J. (2013). Capital Structure for Multinational Inter- and Intra-Firm Innovation Collaborations. International Journal of Electronic Business Management, 11(3), 212–225.

DOI: 10.5539/ijef.v4n3p191

Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review, 48, 261–297.

Modigliani, Franco, & Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. American Economic Review, 53(3), 433–443. https://doi.org/10.2307/1809167

DOI: 10.9770/jesi.2018.5.4(9)

Muzir, E. (2011). Triangle Relationship among Firm Size, Capital Structure Choice and Financial Performance. Journal of Management Research, 11(2), 87–98.

DOI: 10.13106/jafeb.2019.vol6.no3.41

DOI: 10.15388/omee.2019.10.14

DOI: 10.17549/gbfr.2019.24.3.79

DOI: 10.1108/JAMR-12-2017-0125

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2013). Fundamentals of Corporate Finance. In The McGraw-Hill Companies, Inc. (Tenth). New York: McGraw-Hill/Irwin.

DOI: 10.31580/jei.v5i2.104

DOI: 10.12695/jmt.2019.18.3.5

DOI: 10.3846/btp.2020.12197

DOI: 10.21511/imfi.17(2).2020.08

Subramanyam, K. R. (2014). Financial Statement Analysis (Eleventh). New Jersey: McGraw-Hill/Irwin.

DOI: 10.21511/imfi.17(1).2020.15

Ţaran, A. (2019). Corporate ownership and capital structure: Evidence from Romania. Eastern Journal of European Studies, 10(1), 133–150. Retrieved from www.ejes.uaic.ro

DOI: 10.13106/jafeb.2019.vol6.no3.67

DOI: 10.31937/akuntansi.v6i1.148

DOI: 10.17722/ijrbt.v7i2.421

DOI: 10.1016/j.ecosys.2016.12.003