The Determinants of Capital Structure of Listed Retailing Sector Companies on Indonesia Stock Exchange (IDX)

Introduction. Capital structure must be the concern of the company’s financial managers in expanding and financing the company’s operations. The financing decisions that will be used must have strong implications for the value of the company in the future. The data used in this study were secondary data obtained from the Indonesia Stock Exchange website and from the HOTS PT application. Mirae Aset Sekuritas as well as from the official website of each company in the researched samples. The researched population was listed retailing sector companies on the Indonesia Stock Exchange (IDX) over the period of 2012-2016. The number of companies used was 18. The data analysis used panel data regression on the fixed effect assumption. Purpose. The purpose of this study was to conduct an analysis and obtain empirical evidence of the effect of the Profitability, Tangibility, Firm Size, Growth Opportunity, Liquidity, Business Risk and Non-Debt Tax Shield variables on the capital structure. Results. The results of the study showed that the capital structure (leverage) was influenced by variables of profitability, firm size, liquidity and non debt tax shields (NDTS). Variables of assets tangibility, growth opportunity and business risk did not affect the leverage. Conclusion. The company finance managers should prioritize the internal funding sources and need to be thoroughly in utilizing external funding. The results of the analysis showed that the Pecking Order (POT) theory was more influential than the Trade-Off (TOT) theory. Internal financing sources were preferred to avoid high loan interest rates in Indonesia, foreign exchange risk losses for loans in foreign currencies, government regulations that limit the amount of interest costs that can be charged as tax deduction fees and the Indonesian economy which is vulnerable to global influences