The Effect of Institutional Ownership, Company Size, Profitability, and Tangibility on Capital Structure in Non-Cyclical Consumer Sector Companies Listed on The Indonesia Stock Exchange

Leonardo Putrandy; Hadi Santoso

doi:10.34149/jmbr.v23i1.765

The Effect of Institutional Ownership, Company Size, Profitability, and Tangibility on Capital Structure in Non-Cyclical Consumer Sector Companies Listed on The Indonesia Stock Exchange

Leonardo Putrandy - Department of Management, Widya Dharma Pontianak University
Hadi Santoso - Department of Management, Widya Dharma Pontianak University

Abstract

This study aims to examine the effect of these variables on the capital structure of non-cyclical consumer sector companies listed on the Indonesia Stock Exchange. This study employs a quantitative approach using secondary data obtained from firms’ financial statements for the period 2018–2022. The sample was selected using a purposive sampling method, resulting in 67 companies with a total of 335 observations. The data were analyzed using panel data regression. The results show that institutional ownership has a positive and significant effect on capital structure, while profitability has a significant negative effect. Meanwhile, firm size and tangibility do not have a significant effect on capital structure. These findings support agency theory and pecking order theory in explaining corporate financing decisions. Practically, the findings provide insights for managers and investors in determining optimal financing strategies. Theoretically, this study contributes to the literature on capital structure determinants in companies operating in emerging markets

Keywords

Agency theory, capital structure, company size, institutional ownership, pecking order theory, profitability, tangibility; trade-off theory

Full Text:

PDF

References

Ahmed, F., Rahman, M. U., Rehman, H. M., Imran, M., Dunay, A., & Hossain, M.B. (2024). Corporate capital structure effects on corporate performance pursuing a strategy of innovation in manufacturing companies. Heliyon 10-Research Article, 1-17. https://doi.org/10.1016/j.heliyon.2024.e24677

Bayuny, A. F. R., Fauzi, R. M. Q., Fanani, S., & Aisy, F. N. (2025). Board characteristics and firms’ specific variables on capital structure of consumer cyclical and non-cyclical sectors of Shariah-compliant firms in Indonesia. Airlangga Journal of Innovation Management, 6(4), 642–659. https://doi.org/10.20473/ajim.v6i4.78549

Chang, C., Chen, X., & Liao, G. (2014). What are the reliably important determinants of capital structure in China? Pacific-Basin Finance Journal 30, 87-113. https://doi.org/10.1016/j.pacfin.2014.06.001

Chung, C.Y., Wang, K. (2014). Do institutional investors monitor management? Evidence from the relationship between institutional ownership and capital structure. North American Journal Of Economics And Finance, 1-31. https://ideas.repec.org/a/eee/ecofin/v30y2014icp203-233.html

Dang, V. A., Kim, M., & Shin, Y. (2021). Asymmetric capital structure adjustments: New evidence from dynamic panel threshold models. Journal of Corporate Finance, 66. https://doi.org/10.2139/ssrn.1444488

Desai, R. (2021). Nexus between debt financing and market value moderated by firm size: Panel data evidence from India. Vikalpa: The Journal for Decision Makers, 46(1). https://doi.org/10.1177/09722629211052641

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics. Avenue of The America, New York: Douglas Reiner.

Guner, A. (2016). The determinants of capital structure decisions: New Evidence from Turkish companies. Procedia Economics And Finance 38, 84-89. https://doi.org/10.1016/S2212-5671(16)30180-0

Harjito, A., & Martono. (2011). Buku Manajemen Keuangan Edisi Ke 2. Condongcatur, Depok, Sleman, Yogyakarta, Indonesia: Ekonisia.

Handoo, A., & Sharma, K. (2014). A study on determinants of capital structure in India. IIMB Management Review 26, 170-182. https://doi.org/10.1016/j.iimb.2014.07.009

Haryanto, D. H., Anggraini, M., Ardi, P. R. R. (2022). Pengaruh dewan komisaris independen dan kepemilikan institusional terhadap struktur modal (studi empiris pada perusahaan LQ-45 yang terdaftar di Bursa Efek Indonesia periode 2016-2019). Jurnal Arimbi (Applied Research In Management And Business), Volume 2. No. 1, 44-54. https://doi.org/10.53416/arimbi.v2i2.75

Jensen, T., & Beck, C. (2023). Capital structure decisions in emerging markets. International Journal of Management, 4(1), 1–3.

Khan, S., Akhtar, T., & Qasem, A. (2024). Dynamics of capital structure determinants: Empirical evidence from GCC countries. Future Business Journal, 10, 107. https://doi.org/10.1186/s43093-024-00394-6

Nguyen, T. H., & Nguyen, M. H. (2020). Institutional ownership and corporate financial decisions: Evidence from emerging markets. Emerging Markets Finance and Trade, 56(6).

Nguyen, P., Rahman, N., & Zhao, R. (2022). Profitability and capital structure decisions: Evidence from emerging economies. Finance Research Letters, 46.

Pirzada, K., Mustapha., M. Z., Wickramasinghe, D. (2015). Firm performance, institutional ownership and capital structure: A case of Malaysia. Procedia - Social And Behavioral Sciences 211, 170-176. https://doi.org/10.1016/j.sbspro.2015.11.025

Purnima Rao, S. K. (2019). A study on factors driving the capital structure decisions of small and medium enterprises (SMEs) In India. IIMB Management Review 31, 37-50. https://doi.org/10.1016/j.iimb.2018.08.010

Serghiescu, L., Vaidean, V. L. (2014). Determinant factors of the capital structure of a firm-an empirical analysis. Procedia Economics And Finance 15, 1447-1457. https://doi.org/10.1016/S2212-5671(14)00610-8

Sudiyatno, B., Sudarsi, S., Hartoto, W. E., & Fitriati, I. R. (2023). Does capital structure moderate the impact of the investment opportunity set and institutional ownership on firm value?. Investment Management and Financial Innovations, 20(2), 79–88. https://doi.org/10.21511/imfi.20(2).2023.07

Suseno, G., Putri, E. A., Sari, N., Meilita, W., & Sihite, J. (2026). Mediating role of profitability in the relationship between institutional ownership and firm value: Evidence from Indonesia. Vikara: Student Academic Journal of Business and Management, 1(2). https://doi.org/10.28932/vikara.v1i2.13361

Thesarani, N. J. (2017). Pengaruh ukuran dewan komisaris, kepemilikan manajerial, kepemilikan institusional dan komite audit terhadap struktur modal. Jurnal Nominal, Volume VI Nomor 2, 1-13. https://doi.org/10.21831/nominal.v6i2.16641

Thippayana, P. (2014). Determinants of capital structure in Thailand. Procedia - Social And Behavioral Sciences 143, 1074-1077. https://doi.org/10.1016/j.sbspro.2014.07.558

Tongkong, S. (2012). Key factors influencing capital structure decision and its speed of adjustment of thai listed real estate companies. Procedia-Social And Behavioral Sciences 40, 716-720. https://doi.org/10.1016/j.sbspro.2012.03.254

Vo, X. V., & Ellis, C. (2021). Corporate governance and capital structure: Evidence from emerging markets. International Review of Financial Analysis, 74

Zurigat, Z. (2009). Pecking order theory, trade-off theory and determinants of capital structure: empirical evidence from Jordan. Heriot-Watt University School of Management And Languages, 1-131. http://hdl.handle.net/10399/2244