Firm Size as Moderator to Capital Structure-Its Determinants Relations

J. Fin. Bank. Review 4 (3) 108–115 (2019)

8 Pages Posted: 6 Feb 2020

See all articles by GATR Journals Submitter

GATR Journals Submitter

Global Academy of Training and Research (GATR)

Maya Sari

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia

Netti Siska N

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia

S. Sulastri

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia

Date Written: December 14, 2019

Abstract

Objective - Capital structure policy is a strategic decision related to the selection of funding sources. The best mixed of capital structure will produce a low cost of capital, which in turn can maximize the value of the company. This study aims to determine the effect of company size as a moderator on the relationship of capital structure and its determinant factors on manufacturing companies in Indonesia and Malaysia.

Methodology/Technique – Data were collected from 40 manufacturing companies listed on the Indonesia Stock Exchange and 130 manufacturing companies listed on the Bursa Malaysia during 2008-2017. This study will analyze the determinants of capital structure consisting of liquidity, profitability, tangibility and efficiency as well as company size as a moderating variable. The research method uses panel data regression.

Findings – The company size provides a moderating effect on the relationship between capital structure with liquidity, profitability, tangibility and efficiency, and this moderation effect is strengthened in large companies in Indonesia. Instead, this moderation effect is weakening for large companies in Malaysia

Novelty – Research shows that the "modified pecking order" model is better able to explain the capital structure, policies of manufacturing companies in Indonesia and Malaysia compared to the traditional pecking order and trade off theory models.

Type of Paper - Empirical.

Keywords: Capital Structure; Pecking Order Theory; Trade Off Theory; Manufacturing Company; Moderating Effect

JEL Classification: G23, G30, G32

Suggested Citation

Submitter, GATR Journals and Sari, Maya and Siska N, Netti and Sulastri, S., Firm Size as Moderator to Capital Structure-Its Determinants Relations (December 14, 2019). J. Fin. Bank. Review 4 (3) 108–115 (2019). Available at SSRN: https://ssrn.com/abstract=3511558

GATR Journals Submitter (Contact Author)

Global Academy of Training and Research (GATR) ( email )

Suite 15
Taman Bukit Angkasa, Kuala Lumpur 59200
Malaysia

Maya Sari

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia ( email )

Jl. Dr. Setiabui No.229
Bandung, West Java 40154
Indonesia

Netti Siska N

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia

Jl. Dr. Setiabui No.229
Bandung, West Java 40154
Indonesia

S. Sulastri

Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, Indonesia

Jl. Dr. Setiabui No.229
Bandung, West Java 40154
Indonesia

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