The impact of liquidity on the capital structure of construction companies

Abstract

The purpose of this research is to examine the effect of liquidity on the capital structure of construction sub-sector companies listed on the Indonesia Stock Exchange. Data was collected using secondary data and library research. The population used in this study comprised all construction sub-sector companies listed on the Indonesia Stock Exchange from 2013–2020. In determining the sample, this research applied the purposive sampling method. This study used a sample of 10 construction sub-sector companies and managed and analyzed a total of 80 observational data using E-views software. The results indicate that liquidity has no significant effect on capital structure as measured by LTDAR. However, liquidity had a significant negative effect on capital structure as measured using DAR, DER, STDAR, LTDER, and STDER. The results support the pecking order theory, which states that liquidity and capital structure have a negative relationship.