ACTIVE ADJUSTMENT TOWARDS TARGET CAPITAL STRUCTURE OF CONSUMER GOODS FIRMS

• Main Author: Ramadina, Anisa
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/49614
• Institution: Institut Teknologi Bandung

Indonesia has one of the most competitive and fastest growing consumer goods markets in the world. As the consumer goods industry continue to growth, the companies may seek to use external financing, such as equity or debt, to maximizes the firms value which will influence the capital structure. When managers prioritize to maximizes the firms value, it is expected that there is an optimal target capital structure they want to achieve. This study aims to explore the determinants that affect the capital structure in the consumer goods industry, the existence of optimal capital structure, and whether the managers actively or passively adjust the capital structure. The author has collected secondary data from the annual report of 32 companies in the consumer goods industry sector listed in the Indonesia Stock Exchange. The study will used the dynamic capital structure model and will be analyse using the panel data regression. The results indicates there is a significant relationship of profitability, liquidity, tangibility, firm size, and non-debt tax shield with leverage. Most of the companies use active adjustment their capital structure with the speed of adjustment of 61.23% per year. The period needed to achieve the optimal capital structure is 2 years.