ABSTRACT
Capital structure policy has a strategic role to create corporate value. The policy is intended to select and determine the best composition of the use of funding for the company’s operational and investment activities. This study aims to analyze the company’s capital structure policy through an analysis of determinants of capital structure and the moderating effect of firm size on the relationship of capital structure and its determinant factors. This research was conducted at manufacturing companies in Indonesia that are listed on the IDX. Based on the purposive sampling approach 884 units of analysis were obtained from 68 manufacturing companies in Indonesia. The research variables used consisted of liquidity, profitability, institutional ownership, tangibility, and efficiency as independent variables, company size as moderation variables, and capital structure as the dependent variable. The research method uses panel data regression. Chow test and Hausman tests were conducted to test the panel data model that will be used. Based on the random effect model, the results of changes in capital structure can be explained by changes in liquidity, profitability, institutional ownership, tangibility, and efficiency which are moderated by company size. Research findings indicate a stronger Pecking Order pattern in manufacturing companies. The use of Pecking Order patterns in manufacturing companies is intended to maintain financial flexibility in anticipation of debt restrictions by creditors when investing in technology. To improve capital structure policy, manufacturing companies in Indonesia not only focus on liquidity performance, profitability, institutional ownership, tangibility, and efficiency but must also consider the size of the company when making capital structure policies.
