The influence of firm, industry and concentrated ownership on dynamic capital structure decision in emerging market
Abstract Purpose – This study aims to evaluate the impact of firm, industry level determinants and ownership concentration on the dynamic capital structure decision in Indonesia and analyses the governing theories. Design/methodology/approach – This study uses the dynamic panel model of generali...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English English |
| Published: |
Emerald
2021
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/91640/13/91640%20-%20The%20influence%20of%20firm%2C%20industry%20and%20concentrated%20ownership..._Scopus.pdf http://irep.iium.edu.my/91640/19/91640_The%20influence%20of%20firm%2C%20industry%20and.pdf http://irep.iium.edu.my/91640/ https://www.emerald.com/insight/content/doi/10.1108/JABS-04-2019-0109/full/html?skipTracking=true |
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| Summary: | Abstract
Purpose – This study aims to evaluate the impact of firm, industry level determinants and ownership
concentration on the dynamic capital structure decision in Indonesia and analyses the governing
theories.
Design/methodology/approach – This study uses the dynamic panel model of generalized method of
moments-System (one-step and two-step) by using a panel data from 2000 to 2014 to examine the
relationship between the determinants and leverage. The results are robust to the various definitions of
leverage, heterogeneity, autocorrelation, multicollinearity and endogeneity concern.
Findings – Growing firms and firms operating in a highly concentrated industry use high level of debt,
taking advantage of the tax shield (trade-off theory). However, if the firms are operating in a highly
dynamic environment, they take on less debt as to avoid bankruptcy risk. Firms in Indonesia opt for debt
financing perhaps to act as a controlling mechanism to mitigate agency conflicts that may exist between
the large controlling shareholders and the minority. Aged and highly profitable firms with high tangible
and intangible assets and liquidity level operating in a high dynamic environment follow the pecking order
theory.
Research limitations/implications – This study does not perform each industry regression individually.
All the industries are pooled together, as the main focus of this study is to examine the factors affecting
leverage of firms in general without giving particular attention to individual industry.
Originality/value – The insights on the impact of ownership concentration and industry characteristics
are novel especially on Indonesia, thus fill the gap in the literature. |
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