Arief Yulianto, FE Manajemen and Dharmawan Agung Buchdadi, - and Ima Widiyanah, - (2020) What Determines the Speed of Adjustment to the Target Capital Structure in Indonesia? Test Engineering and Management, 82. ISSN 0193-4120

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Abstract

The purpose are (1) to test the implementation of the POT or TOT in Indonesia (2) to find out how fast the SOA for companies in adjusting to the direction of the capital structure optimum. The research data are 63 companies with the complete documents within a period of 10 years (2006-2015) that 630 observation units are obtained. Every sector distribution: (1) 18 companies in the field of basic industry and chemistry (28.6%); (2) 13 companies in the field of trade, service, and investment (20.6%); (3) 5 companies in the field of miscellaneous industries (7.9%); (4) 11 companies in the field of consumer goods industry (17.5%); (5) 6 companies in the field of construction (9.5%); (6) 4 companies in the field of infrastructure, utilities and transportation (6.3%); (7) 4 companies in the field of mining (6.3%); and (8) 2 companies in the field of agriculture (3.2%). The Result findings (1) non-financial companies filled the gap of 69.27% between the present leverage and the optimal target equally to 1.44 year to reach the whole target or 0.71 year to reach a half of the target from the present leverage level (2) found that SOA is performed faster if the macro-economic volatility risk happens rather than the business risk does. The macro-economic conditional change is a systematic risk that impacts the speed of adjustment of capital structure. Meanwhile, the business risk is an unsystematic risk that the result may be generalized.

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