The effect of company size, sales stability, asset structure, and business risk on capital structure

Abstract

Purpose: This study investigates the impact of company size, sales stability, asset structure, and business risk on the capital structure of companies listed on the Indonesia Stock Exchange (IDX) in the consumer goods industry sector.

Methods: This research adopts an associative strategy with a causal quantitative approach, using techniques such as descriptive statistics, panel data regression, classical assumption testing, hypothesis testing, and the coefficient of determination with Eviews 10 software. It examines manufacturing companies in the consumer goods sector listed on the IDX from 2017 to 2020, involving 15 companies and 60 observations through purposive sampling. Secondary data was sourced from the IDX website, and hypothesis testing was conducted via the t-test.

Findings: The linear regression analysis of panel data at a significance level of 5% yielded the following conclusions: 1. Company size hurts capital structure. 2. Sales stability positively impacts capital structure. 3. Asset structure has a positive and significant effect on capital structure. 4. Business risk does not significantly affect capital structure. The regression model is deemed appropriate for predicting capital structure, indicating that company size, sales stability, asset structure, and business risk are relevant factors in forecasting the level of capital structure.

Practical Implications: This study emphasizes the importance of considering factors that influence capital structure, noting that firm size can negatively affect it. Companies should improve sales stability and strengthen asset structure for better funding access while prioritizing risk management to ensure financial sustainability and efficiency. These insights are valuable for managers and stakeholders when making monetary policy decisions.