Company managers should focus on increasing the size of the company and growth opportunities

Oct 13, 2025 by leolavanderia.com.br 29 views

Analysis of Factors Affecting Capital Structure with Institutional Ownership as Moderating Variables in Manufacturing Companies Listed on the Indonesia Stock Exchange

Introduction

In the world of investment, the company's capital structure is an important aspect that can affect the company's performance and sustainability. The capital structure of a company refers to the mix of debt and equity used to finance its operations and investments. A well-structured capital structure can help a company to achieve its financial goals, while a poorly structured capital structure can lead to financial distress and even bankruptcy. This study aims to analyze the factors that influence the capital structure of manufacturing companies listed on the Indonesia Stock Exchange (IDX) by considering institutional ownership as moderating variables.

Research Background

The Indonesia Stock Exchange (IDX) is the primary stock exchange in Indonesia, and it plays a crucial role in the country's financial system. The IDX is home to over 600 listed companies, including manufacturing companies that are the focus of this study. The manufacturing sector is a significant contributor to Indonesia's economy, and it is expected to continue growing in the coming years. However, the sector faces various challenges, including high production costs, intense competition, and limited access to financing.

This study uses a causal associative method that analyzes the population of 88 manufacturing companies listed on the IDX with foreign share ownership owned by domestic institutions in the period 2012 to 2015. Sampling is carried out in a census, producing 352 sample data which forms the basis of analysis. The study aims to identify the factors that influence the capital structure of manufacturing companies and to examine the moderating effect of institutional ownership on these relationships.

Main Findings

The results of this study show that simultaneously, all independent variables have a significant influence on the capital structure. However, if analyzed partially, only two variables, namely the size of the company and growth opportunity, show a significant positive effect on the capital structure. Meanwhile, the variable tangibility, market valuation, and profitability do not show a significant effect on the capital structure.

Interestingly, institutional ownership cannot moderate the relationship between profitability, tangibility, company size, growth opportunity, and market valuation with capital structure. This indicates that although institutional ownership can have an influence in a particular context, in this analysis, institutional ownership is not strong enough to influence the relationship between these variables and the capital structure.

In-Depth Analysis

The significant positive influence of the company's size on capital structure can be explained through better access to financial resources for larger companies. Large companies tend to have more assets and better reputation, which increases their ability to get financing from various sources. This is consistent with the pecking order theory, which suggests that companies prefer to use internal financing before resorting to external financing.

Meanwhile, positive growth or growth opportunity illustrates the company's future potential for expansion. Companies that have the opportunity to grow in the market will be more likely to use debt as part of their capital structure to finance investment, so as to produce a positive influence on the capital structure. This is consistent with the trade-off theory, which suggests that companies balance the benefits of debt financing against the costs of financial distress.

On the other hand, the absence of a significant influence of tangibility, market valuation, and profitability can show that analyzed companies may have their own preferences in debt and equity management. This could be caused by dynamic economic conditions, where these factors are not enough determinative in making capital structure decisions.

Conclusion

This research provides important insights for investors and company managers in the manufacturing sector. In the management of capital structure, more attention must be given to the size of the company and growth opportunities, while other factors may need to be re-evaluated. This discovery also confirms the need for a deeper understanding of the role of institutional ownership in strategic decision making related to capital structure.

Thus, the results of this study not only contribute to academic literature regarding company finances, but also provide practical implications for more effective company management in the future. The study's findings can be used by investors and company managers to make informed decisions about capital structure and to develop strategies for improving financial performance.

Recommendations

Based on the findings of this study, the following recommendations are made:

Company managers should focus on increasing the size of the company and growth opportunities. This can be achieved through strategic planning, investment in research and development, and expansion into new markets.
Institutional ownership should be considered as a potential moderating variable. This can be achieved through active engagement with institutional investors and the development of relationships with key stakeholders.
Other factors, such as tangibility, market valuation, and profitability, should be re-evaluated. This can be achieved through a review of the company's financial policies and the development of new strategies for managing debt and equity.

By following these recommendations, company managers and investors can improve their understanding of the factors that influence capital structure and make more informed decisions about financial management.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only examines the population of 88 manufacturing companies listed on the IDX, which may not be representative of all manufacturing companies in Indonesia. Secondly, the study only considers institutional ownership as a moderating variable, which may not be the only factor influencing capital structure. Finally, the study only examines the period from 2012 to 2015, which may not be representative of current market conditions.

Future Research Directions

This study provides a number of opportunities for future research. Firstly, the study's findings can be used to develop new theories and models of capital structure. Secondly, the study's methodology can be used to examine other factors that influence capital structure, such as corporate governance and financial reporting. Finally, the study's findings can be used to develop new strategies for improving financial performance in the manufacturing sector.

Conclusion

In conclusion, this study provides important insights into the factors that influence capital structure in manufacturing companies listed on the Indonesia Stock Exchange. The study's findings show that the size of the company and growth opportunities have a significant positive effect on capital structure, while institutional ownership does not have a moderating effect. The study's recommendations provide a number of opportunities for company managers and investors to improve their understanding of capital structure and make more informed decisions about financial management.
Q&A: Analysis of Factors Affecting Capital Structure with Institutional Ownership as Moderating Variables in Manufacturing Companies Listed on the Indonesia Stock Exchange

Introduction

In our previous article, we discussed the analysis of factors affecting capital structure with institutional ownership as moderating variables in manufacturing companies listed on the Indonesia Stock Exchange. In this article, we will answer some of the most frequently asked questions related to this topic.

Q: What is capital structure, and why is it important?

A: Capital structure refers to the mix of debt and equity used to finance a company's operations and investments. It is an important aspect of a company's financial management, as it can affect the company's performance and sustainability.

Q: What are the factors that influence capital structure?

A: The factors that influence capital structure include profitability, tangibility, company size, growth opportunity, and market valuation. These factors can affect the company's ability to access financing and the cost of financing.

Q: What is institutional ownership, and how does it affect capital structure?

A: Institutional ownership refers to the ownership of a company's shares by institutional investors, such as pension funds, mutual funds, and insurance companies. Institutional ownership can affect capital structure by influencing the company's financial policies and the cost of financing.

Q: What are the benefits of a well-structured capital structure?

A: A well-structured capital structure can help a company to achieve its financial goals, reduce the cost of financing, and improve its credit rating. It can also provide a competitive advantage in the market.

Q: What are the risks of a poorly structured capital structure?

A: A poorly structured capital structure can lead to financial distress, bankruptcy, and a loss of investor confidence. It can also increase the cost of financing and reduce the company's credit rating.

Q: How can company managers and investors improve their understanding of capital structure?

A: Company managers and investors can improve their understanding of capital structure by conducting research, analyzing financial data, and consulting with experts. They can also use financial models and tools to analyze the company's capital structure and make informed decisions.

Q: What are the implications of this study for company managers and investors?

A: The implications of this study are that company managers and investors should focus on increasing the size of the company and growth opportunities, while re-evaluating other factors that influence capital structure. They should also consider institutional ownership as a potential moderating variable.

Q: What are the limitations of this study?

A: The limitations of this study are that it only examines the population of 88 manufacturing companies listed on the Indonesia Stock Exchange, which may not be representative of all manufacturing companies in Indonesia. It also only considers institutional ownership as a moderating variable, which may not be the only factor influencing capital structure.

Q: What are the future research directions for this study?

A: The future research directions for this study are to develop new theories and models of capital structure, to examine other factors that influence capital structure, and to develop new strategies for improving financial performance in the manufacturing sector.

Conclusion

In conclusion, this Q&A article provides answers to some of the most frequently asked questions related to the analysis of factors affecting capital structure with institutional ownership as moderating variables in manufacturing companies listed on the Indonesia Stock Exchange. We hope that this article will provide valuable insights for company managers and investors who are interested in improving their understanding of capital structure.