Lembaga Penyelidikan Ekonomi dan Masyarakat – Fakultas Ekonomi dan Bisnis – Universitas Indonesia

Macro Uncertainties and Tests of Capital Structure Theories across Renewable and Non-Renewable Resource Companies

Desember 14, 2021

Author: Denny Irawan, Tatsuyoshi Okimoto

Executive Summary

 

Capital structure is one of the most critical decisions for ?rms in business. This study examines the role of macro (economic and non-economic) uncertainties in affecting ?rms� capital structure management. Three prominent capital structure theories are tested for global resource ?rms: (1) static trade-off, (2) pecking order, and (3) market timing theory. The results suggest that no single theory prevails, although both pecking order and market timing theories have certain explanatory power to explain sample ?rms� ?nancing behaviour. The pecking order theory is strongly supported by the results of the leverage target adjustment model. However, the downward cyclical patterns of pecking order coef?cients suggest that the resource ?rms tend to choose debt ?nancing less and less over time, particularly after 2008. The market timing theory holds strong, as indicated by the signi?cance of macro condition (uncertainties) variables in determining sample ?rms� capital structure, especially after 2008 and for non-renewable ?rms. However, the main proxies of the cost of debt are not statistically signi?cant. In conclusion, this study ?nds that resource ?rms have a particular pecking order preference when they need ?nancing, and the in?uence of macro uncertainties are vital in determining their capital structure.

Download (PDF, 3.62MB)

Publikasi Terbaru

Inflasi Bulanan, Juli 2024 – Seri Analisa Makroekonomi

Juli 3, 2024

Analysis of Korean’s ODA Projects in Indonesia: Development Demands, Projects Performance, and Satisfaction

Juli 2, 2024

Kondisi Permintaan Tenaga Kerja Indonesia – Labor Market Brief, Juni 2024

Juni 30, 2024

Harga Biji Kopi Fluktuatif Usaha Roastery dan Coffee Shop Antisipatif – TRADE AND INDUSTRY BRIEF Juni, 2024

Juni 28, 2024

Publikasi Terkait

inflasi juli

Inflasi Bulanan, Juli 2024 – Seri Analisa Makroekonomi

Korea in Indonesia

Analysis of Korean’s ODA Projects in Indonesia: Development Demands, Projects Performance, and Satisfaction

tenaga kerja indonesia

Kondisi Permintaan Tenaga Kerja Indonesia – Labor Market Brief, Juni 2024