The Effect of Intitutional Ownership, Profitability, and Growth on Capital Structue - Case Study on Companies Listed on The LQ45 Index, 2010–2015

Widya Aulia Sudarman, Widi Hidayat

2018

Abstract

The main objective of this research is to investigate the explanatory factors that affect the capital structure choice of companies in the period after a global economic crisis. Explanatory variables in this study cover institutional ownership, profitability, and growth. The investigation is based on two major competing theories in the capital structure literature, i.e. pecking order theory/static trade-off theory and agency theory. This research examines firms listed on the LQ45 index for the period 2010–2015. The sample was selected through purposive sampling, with 17 firms being selected for this research. The data used in this study was taken from annual reports. Multiple regression analysis was used to process the data and the hypotheses were tested by means of F-statistics test and t-statistics tests at the 5% significant level. The result of the F-test show that institutional ownership, profitability, and growth simultaneously influence capital structure. Further, the partial t-test results show that (1) institutional ownership has an influence on capital structure, with a positive correlation; (2) profitability and growth do not have an influence on capital structure, with a positive correlation; (3) firms listed on the LQ45 index follow static trade-off theory in regards to profitability and pecking order theory with regard to growth. Institutional ownership does not follow agency theory.

Paper Citation

in Harvard Style

Sudarman W. and Hidayat W. (2018). The Effect of Intitutional Ownership, Profitability, and Growth on Capital Structue - Case Study on Companies Listed on The LQ45 Index, 2010–2015.In Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study - Volume 1: JCAE Symposium, ISBN 978-989-758-339-1, pages 566-573. DOI: 10.5220/0007018205660573

in Bibtex Style

@conference{jcae symposium18,
author={Widya Aulia Sudarman and Widi Hidayat},
title={The Effect of Intitutional Ownership, Profitability, and Growth on Capital Structue - Case Study on Companies Listed on The LQ45 Index, 2010–2015},
booktitle={Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study - Volume 1: JCAE Symposium,},
year={2018},
pages={566-573},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0007018205660573},
isbn={978-989-758-339-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study - Volume 1: JCAE Symposium,
TI - The Effect of Intitutional Ownership, Profitability, and Growth on Capital Structue - Case Study on Companies Listed on The LQ45 Index, 2010–2015
SN - 978-989-758-339-1
AU - Sudarman W.
AU - Hidayat W.
PY - 2018
SP - 566
EP - 573
DO - 10.5220/0007018205660573