THE DETERMINANTS OF CAPITAL STRUCTURE: EVIDENCE FROM INDONESIAN FIRMS

This paper examines the firm-specific determinants of leverage among Indonesian firms. This paper conducts a panel data analysis of listed firms' observations in the Indonesian stock market from 2008-to 2016. We use panel data analysis to estimate the model and analyses the data from DataStream. The results show that fixed assets, profitability, size, market-to-book ratio, and GDP positively and nonsignificant impact debt. In contrast, inflation has a positive and non-significant impact on the debt. However, despite the use of relatively recent data and a larger sample of firms compared to the previous limited studies on Indonesia, the results of this study need to be interpreted with caution. First, the selected sample focused on 279 listed companies in Indonesia. Second, the study does not distinguish companies by sector and their leverage position, i.e. too low and too high leverage, so financial decisions may also be influenced by the sector in which the companies operate and their leverage position. This should be considered in future research. Tangibility, size, GDP, and inflation positively impact corporate leverage, while profitability and market-to-book ratio have a negative impact on corporate leverage