Driving Factors of Capital Structure: An Empirical Analysis of Size, Profitability, Liquidity, and Asset Composition

Reni  Mulyani; Zainal zawir simon

doi:10.64463/q7e28q93

Authors

Reni Mulyani Faculty of Economics and Business, YARSI University, Jakarta Author
Zainal zawir simon Faculty of Economics and Business, YARSI University, Jakarta Author

DOI:

https://doi.org/10.64463/q7e28q93

Keywords:

Company Size, Profitability, Liquidity, Asset Structure

Abstract

The purpose of this study is to determine the effect of company size, profitability, liquidity and asset structure on capital structure. The population in this study comprises pharmaceutical companies listed on the Indonesia Stock Exchange for the period 2010-2017. This study uses multiple analytical methods with SPSS Statistics version 23. The sampling technique uses purposive sampling. The survey results indicate that profitability and asset structure affect capital structure, whereas company size and liquidity do not. Managerial Implications: The results of the study suggest that profitability and asset structure influence capital structure, so management should prioritize strengthening the company's ability to generate profits and managing asset composition optimally to increase funding flexibility. Financial decision makers need to be more careful in determining the portion of debt, especially for companies with low profitability or asset structures that are less supportive than collateral. In addition, companies can re-evaluate their strategies for using internal and external funds, ensuring that funding policies are aligned with actual financial conditions and support operational sustainability and company competitiveness.

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