THE EFFECT OF CAPITAL STRUCTURE TOWARDS SMALL AND MEDIUM ENTERPRISES PERFORMANCE

Abstract

The research is conducted to examine the effect of capital structure on the fianncial performance of small and medium-sized enterprises (SMEs). The data of this research is obtained from twenty (20) corporations of SMEs enlisted in Indonesia Stock Exchange since 2002 – 2007. Quantitative research is applied so it can be analyzed through mathematical expression, and then it can be used to identify the study in the research. Secondary data is used in this study which is based on Indonesian Capital Market Directory and Indonesian Stock Exchange. Multiple regression is also used as the statistical method to analyze the effect between dependent variables with independent variables, and also effect from contol variables. Furthermore, the result of this research is to examine that Short-term Debt, Long-term Debt, have the positive effect towards the Performance. Meanwhile Total Debt and Trade Credit have the negative effect towards the Performance. In the end, the writer intends to make some suggestion; (a) for company to consider the policy to gain its performance seen from Gross Profit Margin, Return on Assets, and Tobin’s Q (dependent variables) and (b) for investors to consider factors such as Short-term Debt, Long-term Debt, Total Debt (independent variables).