CAPITAL STRUCTURE OPTIMALIZATION OF INDONESIA STATE OWNED ENTERPRISE (SOE) CONSTRUCTION COMPANY USING COST OF CAPITAL APPROACH
Indonesian government has accelerated infrastructure development in past few years to minimize gap with other countries. This can be represented by portion infrastructure development in APBN recently. In several government infrastructure projects, State Owned Enterprise (SOE) as agent of development...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/36228 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Indonesian government has accelerated infrastructure development in past few years to minimize gap with other countries. This can be represented by portion infrastructure development in APBN recently. In several government infrastructure projects, State Owned Enterprise (SOE) as agent of development got credentials from government to execute it. The contracts has made asset of several SOE Construction Company increasing, so has their revenue. However, their highly growth has made them to fund the projects and contracts by external funding.
External funding includes adding capital from debt or equity. Cost of debt is lower than cost of equity, and this make company generally choose to issue debt such as bonds, bank loans, medium term notes and other debt instruments. This resulted increasing debt ratio of several SOE Construction Companies (WIKA, ADHI, PTPP and WSKT) and their capital structures are dominated by debt. In capital structure, company shall determines the best composition between debt and equity so cost of capital will be optimum and finally maximize value of company.
Cost of capital approach can find out condition of the company whether underleverage or overleverage condition. The results of cost of capital simulation shows that PT Wijaya Karya is underleverage condition with optimum debt ratio at 60% (while actual debt ratio at 38.95%), PT PP is in optimum condition with debt ratio 34.11% while PT Adhi Karya and PT Waskita Karya are in overleverage conditions with optimum debt ratio 20% and 40% respectively (while their actual debt ratio 53.60% and 57.69% respectively). In this condition, companies can change their financial composition to improve their capital structure with some efforts and strategies. So they will get optimal cost of capital.
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