Analysis of Factors Affecting Capital Structure of Manufacturing Companies

Abstract

Capital Structure is a combination of debt and equity. Funding decisions related to investment spending or financing activities." The funding sources can come from internal or external sources. In determining the optimal capital structure decision becomes a very difficult task for financial managers because the impact will involve the prosperity of the company and the people in it, the managers in charge of finding the right proportion of the use of funds for the company. The purpose of this study is to examine the factors that influence capital structure and obtain empirical evidence regarding the effect of Growth Opportunity, Asset Structure, and Sales Growth on Capital Structure in manufacturing companies listed on the Indonesia Stock Exchange. The research subjects are manufacturing companies listed on the Indonesia Stock Exchange for the 2017-2019 period. While the object of research includes Capital Structure, Growth Opportunity, Asset Structure, and Sales Growth. The research uses a panel data model, where in the early stages the selection of a panel data regression model is carried out in accordance with the research data. The selection of the most suitable panel data to be used is done by using the Chow test, Hausman test and Lagrange multiplier test. Based on the selected regression model, the research hypothesis was then tested. This study uses a purposive sampling technique to select companies to be sampled. The results of this study indicate that "growth opportunity has a significant effect on capital structure, asset structure has no significant effect on capital structure and sales growth has a significant effect on capital structure."