Relationship Analysis of Capital Structure and Profitability Ratio in Trade Sector Companies in Indonesia
DOI:
https://doi.org/10.38035/jafm.v2i1.44Keywords:
Capital Structure; Trade; Financial Performance; Profitability RatioAbstract
A composition or a structure of liabilities is the definition of the capital structure of a company. The purpose of the study is to analyze the structure of capital and the performance of finance during the years 2015 to 2018 (4 years) in the enterprise sector is national Trade in Indonesia. The research sample was processed from the annual report data Trade sector companies in Indonesia that are listed on the Indonesia Stock Exchange, this is in accordance with the objectives of this study. The method of analysis in this study uses panel data regression. The relationship between capital structure and profitability ratios will be revealed from this study. Variables independently that structure capital will be in proxy with a debt to equity ratio (DER), debt to asset ratio (DAR), and long-term debt ratio (LTDR). And for variable dependent is the performance of finance will be in proxy with Gross Profit Margin (GPM), Net Profit Margin (NPM), and Return on Capital Employed (ROCE). Research on the company's sector of Commerce in Indonesia resulted in a relationship that significant between variables independent manner together against variable dependent.
References
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Amidu, M. (2007). Determinants of capital structure of banks in Ghana: An empirical approach. Baltic Journal of Management, 2(1), 67–79. https://doi.org/10.1108/17465260710720255
Arbabiyan, A.-A., & Safari, M. (2009). The effects of capital structure and profitability in the listed firms in Tehran Stock Exchange. Journal of Management Perspective, 33(12), 159–175.
Barbosa, N., & Louri, H. (2005). Corporate performance: Does ownership matter? A comparison of foreign- and domestic-owned firms in Greece and Portugal. Review of Industrial Organization, 27(1), 73–102. https://doi.org/10.1007/s11151-005-4920-y
Berger, A. N., & Bonaccorsi di Patti, E. (2006). Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking and Finance, 30(4), 1065–1102. https://doi.org/10.1016/j.jbankfin.2005.05.015
Bodhanwala, R. J. (2014). Testing the Efficiency of Price-Earnings Ratio in Constructing Portfolio. IUP Journal of Applied Finance, 20(3).
Champion, D. (1999). Finance: the joy of leverage. Harvard Business Review, 77(4), 19–22.
Fan, J. P. H., Titman, S., & Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and Quantitative Analysis, 47(1), 23–56. https://doi.org/10.1017/S0022109011000597
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.
Hadlock, C. J., & James, C. M. (2002). Do banks provide financial slack? Journal of Finance, 57(3), 1383–1419. https://doi.org/10.1111/1540-6261.00464
Hasan, M. B., Ahsan, A. F. M. M., Rahaman, M. A., & Alam, M. N. (2014). Influence of Capital Structure on Firm Performance: Evidence from Bangladesh. International Journal of Business and Management, 9(5), 184–194. https://doi.org/10.5539/ijbm.v9n5p184
Haugen, R. A., & Pappas, J. L. (n.d.). Equilibrium in the Pricing of Capital Assets, Risk-Bearing Debt instruments and the Question of Optimal Capital Structure," Journal of Financial and Quantitative Analysis (June 1971), pp. 943-954. Yutaki Imai and Mark E. Rubinstein. Comment." and Robert A. Haugen and James L. Pappas." Reply," Journal of Financial and Quantitative Analysis (September 1972), 1995–2004.
Jensen, M. C., & Meckling, W. H. (1979). Theory of the firm: Managerial behavior, agency costs, and ownership structure. In Economics social institutions (pp. 163–231). Springer.
Kasozi, S. J. (2009). the Capital Structure Practices of Listed Firms in South Africa Stephen Jason Kasozi November 2009. November, 1–150.
Lipson, M. L., & Mortal, S. (2011). Liquidity and Capital Structure. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.887413
Lislevand, C. J. (2012). The effect of capital structure on microfinance institutions performance. Universitetet i Agder; University of Agder.
Meero, A. A. (2015). The Relationship between Capital Structure and Performance in Gulf Countries Banks: A Comparative Study between Islamic Banks and Conventional Banks. International Journal of Economics and Finance, 7(12), 140. https://doi.org/10.5539/ijef.v7n12p140
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.
Nirajini, A., & Priya, K. B. (2013). Impact of Capital Structure on Financial Performance of the Listed Trading Companies in Sri Lanka. International Journal of Scientific and Research Publications, 3(5), 1–9.
Roden, D. M., & Lewellen, W. G. (1995). Silver Anniversary Commemoration (Summer, 1995). Management, 24(2), 76–87.
Saad, N. M. (2010). Corporate Governance Compliance and the Effects To Capital Structure in Malaysia. International Journal of Economics and Finance, 2(1), 105–114. https://doi.org/10.5539/ijef.v2n1p105
San, O. T., & Heng, T. B. (2011). Capital structure and corporate performance of Malaysian construction sector. International Journal of Humanities and Social Science, 1(2), 28–36.
Stiglitz, J. E. (1969). A re-examination of the Modigliani-Miller theorem. The American Economic Review, 59(5), 784–793.
TITMAN, S., & WESSELS, R. (1988). The Determinants of Capital Structure Choice. The Journal of Finance, 43(1), 1–19. https://doi.org/10.1111/j.1540-6261.1988.tb02585.x
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Published
2021-03-04
How to Cite
Suciati, R., Marlina, M., Rialmi, Z., & Nastiti, H. (2021). Relationship Analysis of Capital Structure and Profitability Ratio in Trade Sector Companies in Indonesia. Journal of Accounting and Finance Management, 2(1), 9–29. https://doi.org/10.38035/jafm.v2i1.44
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