Abstract:
The capital structure of companies holds paramount significance, exerting a profound
impact on their financial health. In particular, companies grappling with substantial debt
loads may find themselves burdened and constrained. This study endeavors to scrutinize
the influence of various factors, including profitability, growth, non-debt tax shield, and
asset tangibility, on capital structure. Additionally, this research incorporates firm age
and size as control variables to account for potential variations. A purposive sampling
method was employed, encompassing a sample of 21 companies within the construction
sector, spanning both infrastructure and property, and real estate domains, listed on the
Indonesia Stock Exchange during the period from 2013 to 2022. To conduct our analysis,
we utilized STATA for both descriptive statistical examination and panel data regression
analysis. Our findings reveal that profitability and asset tangibility exhibit a negative
correlation with capital structure, suggesting that firms with higher profitability and more
tangible assets tend to employ lower leverage. Conversely, growth displays a positive
relationship with capital structure, indicating that expanding firms may utilize higher
leverage to fund their growth initiatives. Furthermore, our analysis reveals that the impact
of non-debt tax shields on capital structure is insignificant. The study also carefully
controlled for variations in the debt-to-equity ratio attributable to the age and size of the
companies. The outcomes of this research contribute valuable insights to the field of
financial management, facilitating a deeper understanding of the determinants of capital
structure in the context of construction companies in Indonesia. These findings have the
potential to assist practitioners and policymakers in making informed decisions related to
capital structure, ultimately aiding in the resolution of contemporary financial challenges.
