Pustaka Ilmiah Universitas Padjadjaran

Abstrak

Debt Or Equity: An Analysis On Funding Decision (Studied Of Companies Of Indonesia)

A company leverage can be used as a proxy for capital structure of a company as a result from its funding decision. By investigating the effect of leverage deviation lag, this paper try to examine whether or not companies in Indonesia base their funding decision on targetted leverage. Sample data are taken from non-finance companies issuing their stocks and bonds on BEI. Target leverage itself is measured by using annual average values and regression-based predicted leverage for each group of industries. The method used for the measurement is panel regression with fixed effect Data shows that, using both regression-based predicted leverage and annual average values, the actual leverage deviation for periode t-1 does not affect the value of periode t leverage, while leverage lag on periode t-1 does have a positive effect on periode t leverage. The fact that a higher lag in leverage brings about a correlatively higher leverage leads to the conclusion that funding decision and capital structure in Indonesian companies does not always conform to the Trade-Off theory, but rather corresponds well with the Pecking Order theory.