SPEED OF ADJUSTMENT TOWARDS TARGET CAPITAL STRUCTURE IN INDONESIAN PROPERTY AND REAL ESTATE COMPANIES

• Main Author: Nurlaila Badrina (19015081), Nadia
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/29482
• Institution: Institut Teknologi Bandung

This study aims to explains the empirical evidence of the determinants of capital structure in both <br /> <br /> static and dynamic model in property and real estate industry in Indonesia during the period of <br /> <br /> 2008-2017, as well as the speed of adjustment, whether the adjustment is done actively by corporate <br /> <br /> action or passively by using retained earning. <br /> <br /> This study used multiple regression method to test the determinants of capital structure; growth <br /> <br /> opportunity, size of firm, dividend payout, profitability, tangibility, liquidity and loan to value ratio. The <br /> <br /> dynamic model used the lagged version of the static variable plus lagged leverage in active adjustment <br /> <br /> and passive adjustment. <br /> <br /> This research proved that growth opportunity, size of firm, profitability, and tangibility are <br /> <br /> significant towards leverage at 5% significance level and liquidity is significant at 10% significance level. <br /> <br /> The dividend payout and loan to value ratio proved to be not significant towards capital structure in <br /> <br /> property and real estate companies. <br /> <br /> The dynamic model proved that the property and real estate industry has a target capital structure. <br /> <br /> On the active adjustment model, the active lagged leverage and lagged size of firm are significant at 5% <br /> <br /> significance level and lagged growth opportunity is significant at 10% significance level towards the <br /> <br /> target capital structure. Lagged dividend payout, lagged profitability, lagged tangibility, lagged liquidity, <br /> <br /> and lagged loan to value ratio are not significant to the target capital structure. The passive adjustment <br /> <br /> model shows similar result to active adjustment model but lagged growth opportunity is not significant to <br /> <br /> target capital structure. Property and real estate industry speed of adjustment towards target leverage is <br /> <br /> 24.54% and 26.71% each year for active adjustment and passive adjustment respectively. This study <br /> <br /> found that in property and real estate, firms tend to adjust their capital structure passively.