Analysis of the effect of assets structure, earning volatility and financial flexibility on capital structure in consumer goods industry sector companies on the Indonesia stock exchange

• Published in: LBS journal of management & research 2024-07, Vol.22 (1), p.25-36
• Main Authors: Putri, Rumanintya Lisaria, Willim, Andre Prasetya
• Format: Article
• Language: English
• Subjects: Assets structure; Asymmetry; Capital structure; Collateral; Corporate profits; Dividend distributions; Earning volatility; Financial flexibility; Fixed assets; Flexibility; Funding; Investments; Investors; Long term debt; Preferred stock; Profitability; Retained earnings; Stockholders; Volatility
• ISSN: 0972-8031; 0974-1852
• DOI: 10.1108/LBSJMR-11-2022-0069

PurposeCapital structure is an important factor for the company because it will be directly related to the financial condition of the company. This study aims to determine the effect of asset structure, earning volatility, and financial flexibility on capital structure.Design/methodology/approachThe population in this study was 52 companies in the consumer goods industry sector on the Indonesia stock exchange (IDX) and a sample of 39 companies obtained by purposive sampling method. The research method used in this study is multiple linear regression analysis using Eviews software.FindingsThe test results in the study show that asset structure and financial flexibility have a positive effect on capital structure, while earning volatility does not affect capital structure in companies in the consumer goods industry sector on the IDX.Research limitations/implicationsThe results of this research can contribute to the addition of knowledge in the field of accounting, especially regarding the capital structure. Company management can use the results of this research as a reference and consideration to find out the factors that affect the capital structure so that company management can still maintain the company's survival and improve company performance.Practical implicationsThe results of this study can contribute to the addition of knowledge in the field of accounting, especially regarding capital structure. Company management can use the results of this research as a reference and consideration to determine the factors that affect the capital structure so that company management can still maintain the survival of the company and improve company performance.Social implicationsThis study only uses the variables of asset structure, financial flexibility and earning volatility as independent variables. Further research is recommended to consider the use of other variables that can affect capital structure and if using the same variable is expected to use research objects that have stable or increasing asset and income values, so that asset structure variables and profit volatility can show significant results and influences.Originality/valueThis study is one of the few studies that examines how the effect of asset structure, profit volatility and financial flexibility on capital structure in companies in the consumer goods industry sector on the IDX. Company management must pay attention to the composition of the capital structure as well as possible and make ca