The Impact of Capital Structure on Financial Performance of the Listed Agriculture Companies in Indonesia
Global Journal of Business and Social Science Review, Vol. 3(1) 2015. 9-17
9 Pages Posted: 19 Jul 2017 Last revised: 25 Jul 2017
Date Written: January 19, 2015
Objective – The paper analyzes the impact of capital structure on financial performance of the agriculture companies listed in Indonesia Stock Exchange. In addition, this paper also analyze which one between equity and asset that is able to cover the firm’s debt.
Methodology/Technique – The time scope of this thesis is taken from 2010 until 2014 with 16 agricultural companies listed in Indonesia Stock Exchange as the samples. The independent variable in this thesis is capital structure that is measured by Debt Equity Ratio and Debt Asset Ratio. The dependent variable is financial performance that is measured by GPM, NPM, ROA, ROE, and EPS. The methodology used in this thesis is multiple regression and the data is processed by using SPSS.
Findings – The result from this paper shows that Debt Equity Ratio, which is one of the indicators of capital structure, has a significant impact and a negative relationship with ROE. This study also finds that rather than the land, the value of company’s building contributes more significantly towards the agriculture company’s total assets which are more able to cover the debt.
Novelty – The recommendation for agriculture companies are first, they should increase their efficiency to maintain their asset, higher the return and generate more profit margin. Second, they should provide more detailed-information in their financial statement regarding the category and amount of total assets related to agriculture products. Lastly, they should attract more investor to increase their equity.
Type of Paper: Empirical.
Keywords: Capital Structure; Financial Performance; Agricultural Company, Profitability Ratio; Debt Equity, Debt Asset
JEL Classification: H6, H63, H68
Suggested Citation: Suggested Citation