THE INFLUENCE OF EXTERNAL FACTORS AND FIRM SPESIFIC FACTORS TOWARD CAPITAL STRUCTURE OF LISTED INDONESIAN COMPANIES IN LQ45 INDEX

Abstract

Capital structure decision becomes a critical decision for every finance manager, which comes up from several considerations from firm-specific factors, or even external factors. This research aims to analyze the influence of external and firm-specific factors toward capital structure for listed Indonesia companies in LQ45 Index for period 2012-2016. The variables used are the Debt-equity ratio as a dependent variable. External (Interest rate and Exchange rate) and Firm specific factors (Profitability, Size, Tangibility, and Liquidity) as independent variables. The samples used are 11 companies from LQ45 Index that listed on Indonesia Stock Exchange for period 2012-2016 and selected using purposive sampling to fulfill the criteria that have been set up. The approach used in this research is quantitative method and statistical tools. The results of this study are profitability, tangibility, and liquidity negatively significance influences towards debt-to-equity, while size positively significance influences towards debt-to-equity. Profitability is the most significant factors that influence capital structure negatively, means The Pecking Order Theory was applied for most of listed Indonesian companies in LQ45.Therefore; all firm-specific factors are significant influence toward debt-to-equity. Oppositely, Exchange Rate is negatively significance influence towards debt-to-equity, while the interest rate is insignificance.