Profitability and liquidity drive Indonesian companies' capital structure, shaping their value.
The article examines what factors influence the capital structure of Indonesian companies. By analyzing data from 693 firm-year operations, the researchers found that profitability and liquidity have a significant impact on capital structure, as predicted by the pecking order theory. However, non-debt tax shield did not show a strong relationship, and tangibility and size had an opposite effect as suggested by the tradeoff theory.