Optimal Capital Structure and Estimation of the Adjustment Speed of Capital Structure by Industry

AbstractThis study examines the existence of adjustments in the speed of the company's capital structure to achieve an optimal capital structure in accordance with the dynamics of trade-off and other factors affecting the company's capital structure adjustment. The optimal capital structure is estimated by using several variables, namely tangibility, firm size, profitability, liquidity, asset utilization, and business risk. The factors used to predict the optimal capital structure adjustment speed in this study are the distance between the capital structure and the optimal capital structure and financial deficit. The data analysis technique in this study is multiple linear regression with a significance level of 5%. The obtained results indicate that companies on the IDX are adjusting towards the optimal capital structure. The speed of adjustment is 0.128 so it can be concluded that the company's adjustment remains below its optimal debt level. The test results also prove that distance and financial deficit/surplus have no influence on the company's capital structure adjustment speed. Keywords: capital structure, dynamics trade offKecepatan Penyesuaian Struktur Modal Optimal Perusahaan di Bursa Efek IndonesiaAbstrakPenelitian ini menguji keberadaan penyesuaian kecepatan struktur modal perusahaan menuju ke struktur modal optimal sesuai dengan dynamics trade off dan faktor-faktor yang mempengaruhi kecepatan penyesuaian struktur modal optimal perusahaan. Struktur modal optimal diestimasi dengan menggunakan beberapa variabel yaitu tangibility, firm size, profitability, liquidity, asset utilization, dan business risk. Faktor-faktor yang digunakan untuk menduga kecepatan penyesuaian struktur modal optimal pada penelitian ini adalah jarak antara struktur modal dengan struktur modal optimal (distance) dan financial deficit/surplus. Teknik analisis data yang digunakan pada penelitian ini adalah regresi linier berganda dengan tingkat signifikansi sebesar 5%. Hasil yang diperoleh menunjukkan perusahaan-perusahaan di BEI melakukan penyesuaian menuju struktur modal optimal. Kecepatan penyesuaian sebesar 0,128 sehingga dapat disimpulkan bahwa perusahaan-perusahaan melakukan penyesuaian masih di bawah tingkat hutang optimalnya. Hasil pengujian juga membuktikan bahwa tidak terdapat pengaruh distance dan financial deficit/surplus terhadap kecepatan penyesuaian struktur modal perusahaan. Kata Kunci: struktur modal, dynamics trade off

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STRUKTUR MODAL OPTIMAL DAN KECEPATAN PENYESUAIAN: STUDI EMPIRIS DI BURSA EFEK INDONESIA

EKUITAS (Jurnal Ekonomi dan Keuangan) ◽

10.24034/j25485024.y2016.v20.i3.1836 ◽

2017 ◽

Vol 20 (3) ◽

pp. 305

Author(s):

Firda Nosita

Keyword(s):

Capital Structure ◽

Stock Exchange ◽

Practical Implication ◽

Trade Off ◽

Optimal Capital Structure ◽

Financial Firms ◽

Structure Adjustment ◽

Adjustment Speed ◽

Optimal Capital ◽

Target Leverage

The research investigate whether non-financial firms listed on the Indonesian Stock Exchange made capital structure adjustment towards optimal capital structure and the determinants of adjustment speed in context of trade-off theory for 2009-2014 period. Existence of tax benefit that generates by debt interest payment causing firms arranged their capital structure in order to maximize debt utilizing. Debt utilizing would be make default problem and bankruptcy if it excess firm’s capacity that determine by some firm’s characteristic. Because of optimal capital structure unobservable, so they will be estimate by using some variable which are influencing in capital structure arrangement such tangibility. profitability, size and growth opportunities. The results indicate that non-financial firms in Indonesia follows dynamic trade-off theory with make capital structure adjustment towards optimal capital structure but still underleveraged and need 2,45 years to adjust their capital structure. Distance between actual capital structure and optimal capital structure and financial surplus/deficit are influenced speed of adjustments, while current liabilities is not influenced speed of adjustment. Thus, the practical implication is the companies must be consider and compare their actual capital structure and their optimal capital structure in order to get the benefit from the adjustment by not adding the posibility of bankruptcy due to these adjustment. Capital structure decision also related with various external policy, for instance, accesability to external funding such as creditors, investor and government which influence their adjustment. This research has some limitation, proxies are used in determining the target leverage was only four variables and this study did not addres macroeconomic variables that may affect the adjustment and adjustment speed.

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DETERMINANTS OF CAPITAL STRUCTURE’S ADJUSTMENT SPEED: EMPIRICAL ANALYSIS OF REAL ESTATE, PROPERTY, AND CONSTRUCTION FIRMS

Jurnal Bisnis dan Manajemen ◽

10.24198/jbm.v22i1.545 ◽

2021 ◽

Vol 22 (1) ◽

pp. 51-64

Author(s):

Subiakto Soekarno ◽

Eggy Muhammad Prayoga ◽

Indra Yudha Mambea

Keyword(s):

Real Estate ◽

Capital Structure ◽

Negative Impact ◽

Positive Impact ◽

Regression Result ◽

Construction Firms ◽

Optimal Capital Structure ◽

Adjustment Speed ◽

Estate Property ◽

Optimal Capital

This study explored the determinants of capital structure, optimal capital structure, and adjustment speed in real-estate, property, and construction firms in Indonesia. It conducted a quantitative analysis of the annual report of 25 listed firms by employing a generalized method of moment approach with panel data to estimate the result. Results showed that the determinants of capital structure, such as profitability, tangibility, size, and liquidity, have a negative impact on leverage. By contrast, a non-debt tax shield has a positive impact. Based on the regression result, firms have an optimal capital structure target with a yearly adjustment speed of 80%. Furthermore, calculation of optimal target structure shows that firms require approximately three years to meet the discrepancy between their current capital structure and the targeted capital structure.

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