Capital structure and profitability: Evidence from mining companies in Indonesia

Abstract

This study examines the relationship between capital structure and firm performance. The investigation has been performed using panel data pro-cedure for a sample of 42 mining sector Indonesian listed companies on the Indonesian Stock exchange during 2014-2018. The study uses three performance measures which are return on equity (ROE), return on asset (ROA), and earnings per share (EPS) as dependent variable. The five capital structure measure which are debt to asset ratio (DAR), debt to equity ratio (DER), long term debt to total capital (LDTC), long term debt to total equity (LDTE), and growth as independent variable. The results show that DER has no relationship to ROA and EPS while has negative significant to ROE, DAR has a significant negative effect on ROA and EPS while DAR has a significant positive effect on ROE, LDTE has positive significant relationship to ROE while ROA and EPS has no relationship. LDTC has negative significant relationship to return on asset, while ROE and EPS have no relationship. Growth has a significant positive relationship with ROA, ROE, and EPS.