The Speed of Adjustment Capital Structure in The Perspective of Structure-Conduct-Performance Theory

Toni Heryana, Delina Herdian Septiani, Dita Rari Dwi Rinining Tyastuty

Abstract


Main Purpose - The research objective is to explain the factors that determine the speed of capital structure adjustment based on market concentrations on profitability, company growth, liquidity, exchange rates and inflation.

Method - The research method used is the explanatory method with a causality approach. The unit of analysis for this research is non-financial sector issuers listed on the Indonesia Stock Exchange in 2009-2015.

Main Findings - This research finds that the structure-conduct-performance theory can be used as a theory that explains the speed of capital structure adjustment. In addition, the results of the study also found the exchange rate to be a driving factor in increasing the speed of capital structure adjustment.

Theory and Practical Implications - Research findings provide support for the structure-conduct-performance theory which indicates that market concentration is a determining factor in company behavior in adjusting capital structure.

Novelty - This study uses the theory of performance-behavior structure in explaining the variables that determine the speed of capital structure adjustment.

 


Keywords


Speed of capital structure adjustment, Structure-conduct-performance theory, Market concentration

Full Text:

PDF

References


Bain, J. (1968). Industrial Organization 2nd edition, John Wiley and Sons Inc., New York.

Brigham, & Houston. (2006). Fundamentals of Financial Management (4th ed.). New Jersey, United State of America: Prentice Hall.

Camara, O. (2012). Capital Structure Adjustment Speed and Macroeconomic Conditions : U.S MNCs and DCs. International Research Journal of Finance and Economics, 84, 106–120.

Drobetz, W., Pensa, P., & Wanzenried, G. (2006). Firm Characteristics and Dynamic Capital Structure Adjustment. Social Science Research Network, 10(April), 1–36. https://doi.org/10.2139/ssrn.952268

Drobetz, W., & Wanzenried, G. (2006). What Determines the Speed of Adjustment to the Target Capital Structure ? Applied Financial Economics, 16, 941–958.

Elsas, R., & Florysiak, D. (2012). Dynamic Capital Structure Adjustment and the Impact of Fractional Dependent Variables. Social Science Research Network, 10(September), 1–46. https://doi.org/10.2139/ssrn.1632362

Flannery, M. J., & Rangan, K. P. (2006). Partial Adjustment Toward Target Capital Structures. Journal of Financial Economics, 79, 469–506. https://doi.org/10.1016/j.jfineco.2005.03.004

Haron, R., & Ibrahim, K. (2012). Target Capital Structure and Speed of Adjusment: Panel Data Evidence on Malaysia Shariah Compliant Securities. International Journal of Economics, Management and Accounting, 2(2), 87–107.

Huang, R., & Ritter, J. R. (2009). Testing Theories of Capital Structure and Estimating the Speed of Adjustment. Journal of Financial and Quantitative Analysis, 2, 237–271.

Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Cost and Ownership Structure. Journal of Financial Economics, 3, 305–360.

Lemma, T. T., & Negash, M. (2014). Determinants of The Adjustment Speed of Capital Structure Evidence from Developing Economies. Journal of Applied Accounting Research, 15(1), 64–99. https://doi.org/10.1108/JAAR-03-2012-0023

Lipczynski, J., Wilson, J. O. ., & Goddard, J. (2013). Industrial Organization: Competition, Strategy, Policy. Harlow, England: Pearson Education Limited.

Lööf, H. (2004). Dynamic Optimal Capital Structure and Technical Change. Structural Change and Economic Dynamics, 15, 449–468. https://doi.org/10.1016/j.strueco.2003.05.001

Ferguson, P., and Ferguson, G.(1994). Industrial Economics: Issues and Perspectives. 2nd edition. The Macmillan Press LTD.

Mahakud, J., & Mukherjee, S. (2011). Determinants of Adjustment Speed to Target Capital Structure : Evidence from Indian Manufacturing Firms. International Conference on Economics and Finance Research, 4, 67–71. Singapore: IACSIT Press, Singapore.

Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and Theory of Investment. The American Economic Review, 48(3), 261–297.

Mukherjee, S., & Mahakud, J. (2010). Dynamic Adjustment Towards Target Capital Structure : Evidence from Indian Companies. Journal of Advances in Management Research, 7(2), 250–266. https://doi.org/10.1108/09727981011085020

Myers, S. C. (1984). The Capital Structure Puzzle. Journal of Finance, 39(3), 575–592.

Myers, S. C. (2001). Capital Structure. The Journal of Economic Perspectives, 15(2), 81–102.

Neuberger, D. (1998). Industrial Organization of Banking : A Review. International Journal of The Economics of Business, 5(1), 97–118.

Nguyen, P., & Shekhar, C. (2007). The Capital Structure of Japanese Firms: A Partial Adjustment Analysis. New South Wales.

Ozkan, A. (2001). Determinants of Capital Structure and Adjustment to Long Run Target: Evidence from UK Company Panel Data. Journal of Business Finance and Accounting, 28(1–2), 175–198. https://doi.org/10.1111/1468-5957.00370

Oztekin, O., & Flannery, M. J. (2012). Institutional Determinants of Capital Structure Adjustment Speeds. Journal of Financial Economics, 103, 88–112. https://doi.org/10.1016/j.jfineco.2011.08.014

Smith, D. J., Chen, J., & Anderson, H. D. (2010). Partial Adjustment Towards Target Capital Structure : Evidence from New Zealand. Social Science Research Network, 16, 1–45.




DOI: https://doi.org/10.17509/jaset.v15i1.56659

Refbacks

  • There are currently no refbacks.


Creative Commons License

Jurnal ASET (Akuntansi Riset) is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. 

View My Stats Visitor