Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no1.071

Static or Dynamic Capital Structure Policy Behavior: Empirical Evidence from Indonesia  

UTAMI, Elok Sri (Department of Management, Faculty of Economics and Business, Universitas Jember)
GUMANTI, Tatang Ary (Department of Management, Faculty of Economics and Business, Universitas Bhayangkara Jakarta Raya)
SUBROTO, Bambang (Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya)
KHASANAH, Umrotul (Department of Management, Faculty of Economics, Universitas Islam Negeri (UIN) Maulana Malik Ibrahim Malang)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.1, 2021 , pp. 71-79 More about this Journal
Abstract
This study investigates the capital structure policy among Indonesian public companies. Previous studies suggest that capital structure policy could follow either static or dynamic behavior. The sample data used in this study was companies in the manufacturing sector, divided into three sub-sectors: the basic and chemical industry, miscellaneous industry, and the consumer goods industry. This study uses panel data from 2010 to 2018, with the Generalized Least Square (GLS) method and compared whether the fixed effect model is better than the common effect model. The results show that the dynamic and non-linear model tests can explain the capital structure determinants than the static and linear models. The dynamic model shows that the capital structure of a certain year is influenced by the capital structure of the previous year. The findings indicate that the company performs some adjustments in its capital structure policy by referring to the previous debt ratio, which implies support to the trade-off theory (TOT). The study also shows that profitability, tangible assets, size, and age explain the variation of capital structure policy. The patterns on the dynamic and non-linear confirm that capital structure runs in a nonlinear pattern, based on the sector, company condition, and the dynamic environment.
Keywords
Capital Structure; Static; Dynamic; Linear; Non-Linear;
Citations & Related Records
연도 인용수 순위
  • Reference
1 De Jong, A., Kabir, R., & Nguyen, T. T. (2008). The capital structure around the world: The roles of firm- and country-specific determinants. Journal of Banking and Finance, 32(9), 1954-1969. https://doi.org/10.1016/j.jbankfin.2007.12.034   DOI
2 Dinh, H. T., & Pham, C. D. (2020). The effect of capital structure on the financial performance of Vietnamese listing pharmaceutical enterprises. Journal of Asian Finance, Economics, and Business, 7(9), 329-340. https://doi.org/10.13106/jafeb.2020.vol7.no9.329   DOI
3 Flannery, M. J., & Rangan, K. P. (2006). Partial adjustment toward target capital structures. Journal of Financial Economics, 79(3), 469-506. https://doi.org/10.1016/j.jfineco.2005.03.004   DOI
4 Gaud, P., Jani, E., Hoesli, M., & Bender, A. (2005). The capital structure of Swiss companies: An empirical analysis using dynamic panel data. European Financial Management, 11(1), 51-69. https://doi.org/10.1111/j.1354-7798.2005.00275.x   DOI
5 Getzmann, A., Lang, S., & Spremann, K. (2014). Target capital structure and adjustment speed in Asia. Asia-Pacific Journal of Financial Studies, 43, 1-30. https://doi.org/10.1111/ajfs.12038   DOI
6 Handoo, A., & Sharma, K. (2014). A study on the determinants of capital structure in India. IIMB Management Review, 26(3), 170-182. https://doi.org/10.1016/j.iimb.2014.07.009   DOI
7 Jalilvand, A., & Harris, R. S. (1984). Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study. The Journal of Finance, 39(1), 127-145. https://doi.org/10.2307/2327672   DOI
8 Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3, 305-360. https://doi.org/10.1016/0304-405X(76)90026-X   DOI
9 Kabeer, M. A., & Rafique, S. (2018). The determinants of capital structure: Evidence from Pakistani manufacturing companies. Journal of Banking and Finance Management, 74(294), 152-172.
10 Koksal, B., & Orman, C. (2015). Determinants of capital structure: Evidence from a major developing economy. Small Business Economics, 44(2), 255-282. https://doi.org/10.1007/s11187-014-9597-x   DOI
11 Kumar, S., Colombage, S., & Rao, P. (2017). Research on capital structure determinants: A review and future directions. International Journal of Managerial Finance, 13(2), 106-132. https://doi.org/10.1108/IJMF-09-2014-0135   DOI
12 Memon, P. A., Rus, D. R. B. M., & Ghazali, D. Z. B. (2015). The dynamism of Capital Structure: Evidence from Pakistan. Journal of International Business and Economics, 3(1), 52-63. https://doi.org/10.15640/jibe.v3n1a7   DOI
13 Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x   DOI
14 Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187-222. https://doi.org/10.1016/0304-405X(84)90023-0   DOI
15 Baskin, J. (1989). An empirical investigation of the pecking order hypothesis. Financial Management, 18(1), 26-35. https://doi.org/10.2307/3665695   DOI
16 Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). The measurement and antecedents of affective, continuance, and normative commitment to the organization. The Journal of Finance, 56(1), 87-130.   DOI
17 Bradley, M., Jarrell, G. A., & Kim, E. H. (1984). On the existence of an optimal capital structure: Theory and evidence. The Journal of Finance, 29(3), 857-878. https://doi.org/10.2307/2327950   DOI
18 Carpentier, J. M. S., & Suret, J. M. (1999). Financing strategies of French companies: An empirical analysis. CIRANO Working Papers 99s-09, CIRANO.
19 Cortez, M. A., & Susanto, S. (2012). The determinants of corporate capital structure: Evidence from Japanese manufacturing companies. Journal of International Business Research, 11(3), 122-134. https://doi.org/10.1.1.1079.5738   DOI
20 Cempakasari, E. P., Firdaus, M., & Hardiyanto, A. T. (2019). Dynamics of the firm's capital structure along the life cycle of Indonesian manufacturing firms. Indonesian Journal of Business and Entrepreneurship, 5(1), 21-31. https://doi.org/10.17358/ijbe.5.1.21   DOI
21 Nguyen, N. M., & Tran, K. T. (2020). Factors affecting the capital structure of the banks listed on the Iraqi Stock Exchange. Journal of Asian Finance, Economics, and Business, 7(11), 689-698. https://doi.org/10.13106/jafeb.2020.vol7.no11.689   DOI
22 Ozkan, N. (2011). CEO compensation and firm performance: An empirical investigation of UK panel data. European Financial Management, 17(2), 260-285. https://doi.org/10.1111/j.1468-036X.2009.00511.x   DOI
23 Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50(5), 1421-1460. https://doi.org/10.2307/2329322   DOI
24 Rani, N., Yadav, S. S., & Tripathy, N. (2019). Capital structure dynamics of Indian corporates. Journal of Advances in Management Research, 17(2), 212-225. https://doi.org/10.1108/JAMR-12-2017-0125   DOI
25 Rehman, A. U., Wang, M., & Yu, H. (2016). Dynamics of financial leverage across the firm life cycle in Chinese firms: An empirical investigation using a dynamic panel data model. China Finance and Economic Review, 4(9), 1-22. https://doi.org/10.1186/s40589-016-0041-z   DOI
26 Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1-19. https://doi.org/10.2307/2328319   DOI
27 www.ekonomi.kompas.com. (2018). The ministry of industry and manufacturing industry is the largest contributor to tax. Retrieved from https://ekonomi.kompas.com/read/2018/01/09/211727326/kemenperin-industri-manufaktur-penyumbang-pajak-terbesar
28 Vu, T. M. T., Tran, C. Q., Doan, D. T., & Le, T. N. (2020). Determinants of capital structure: The case in Vietnam. Journal of Asian Finance, Economics, and Business, 7(9), 159-168. https://doi.org/10.13106/jafeb.2020.vol7.no9.159   DOI