EFFECT OF PROFITABILITY, ASSET STRUCTURE AND SIZE OF COMPANY CAPITAL STRUCTURE

(Empirical Study On Infrastructure Sector Companies, Utilities, and Transportation Listed in Indonesia Stock Exchange Period 2011-2015)

Dade Nurdiniah1, Agus Munandar2

Kalbis Institute Jakarta1 dade.nurdiniah@kalbis.ac.id , 2 agus.munandar@kalbis.ac.id

ABSTRACT

This study aims to analyse the effect of profitability, asset structure, and the size of the

company's capital structure on a company's infrastructure, utilities, and transportation in

Indonesia Stock Exchange period 2011-2015. This research uses associative research with a

quantitative approach, which is measured using a multiple linear regression method is processed

by the application program IBM SPSS version 22.0. The population of this research that the

company infrastructure, utilities and transportation in BEI period 2011-2015. The sample is

determined by purposive sampling method, Obtained a total sample of 12 companies that

observation of data into 60 observations. Data used in the study is secondary data, the data

collection techniques using the method of documentation via the official website

www.sahamok.com www.idx.co.id and hypothesis testing using t test (partial) and test f

(simultaneously). The results Showed that the profitability (ROA) significant negative effects,

Structure Assets significant positive effect, and Company Size (SIZE) positive effect was not

significant to the capital structure on a company's infrastructure, utilities, and transportation in

the Indonesian stock exchange.

Related Keywords: Profitability, Assets structure, company size, capital structure

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INTRODUCTION

Every company in the conduct of its business needs funds to expand their business and

conduct operations. Source of funds needed could be obtained or satisfied by internal and

external sources of funding. For that financial managers need to determine the capital structure to

determine whether the financing needs can be satisfied with their own capital or foreign capital

necessary to fulfil it. The capital structure is a consideration or comparison between foreign

capital and the capital itself. Foreign capital can be meant as debt, both long-term debt and short-

term. While the capital itself can be divided into retained earnings and may also by inclusion of

company ownership. The capital structure is an important issue for decisions about learning

company.

Effective capital structure is able to make the company strong and stable. Along with the

increase of public knowledge in the field of capital markets and the availability of funds from

investors interested in investing their capital, the capital structure has become one of the

considerations are quite important. It is associated with the risk and revenue to be received. In

looking at the company's capital structure, investors cannot be separated from the enterprise

information such as financial reports issued annually. Investors will perform various analyses

related to the decision to invest in the company through the information that one of the financial

statements. Kamaludin and Indriani (2012: 325-327), there are several important factors to be

considered before taking a decision the company's capital structure, namely the stability of sales,

asset structure, operating leverage, growth rate, profitability, tax, control, management attitude,

the attitude of lenders and the assessing agency binder, financial market conditions, and financial

flexibility. According Nidar (2016: 292) the factors to consider in determining the capital

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structure are: the stability of sales, asset structure, operating leverage, growth rate, profitability,

tax, control, and management attitudes.

Profitability is the ability achieved by the company within a specific period. Profitability

assessment is the basis of financial statements consisting of the balance sheet and income

statement of the company. Based on both of those statements will be determined results and

further analysis of a number ratio this ratio is used to assess certain aspects of the company's

operations. According to Kamaludin and Indriani (2012: 326), the profitability of the company

the previous year as an important basis for determining capital structure coming year. The

structure of assets of the company plays an important role in determining the financing

companies that have non-current assets Long-term high, due to high demand for their products,

will use a lot of long-term mortgage debt. According to Nidar (2016: 292), a company whose

assets suitable as collateral for loans, it tends to use debt. Judging from the accounting aspects,

reconstruction the financial statements will result in changes in the balance sheet. Changes on the

asset side (structure of assets) are reflected on the changes in the composition of assets, both

current assets, as well as non-current assets.

While the size of the company described the size of the company, so the large-small size

of the company will affect the capital structure, the larger the company, the greater the company

needed funds to invest. The larger is the size of a company, the greater the company's use of

foreign capital. This is because big companies need to funds to support its operations, and its

fulfilment is one of the alternatives to foreign capital / debt when their own capital is insufficient.

Based on the aforementioned problems associated with the effect of profitability, asset

structure, and the size of the company on the capital structure that has been done by previous

researchers, the reason of this study was to re-examine the variables put forward by Kanita

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(2014), Edison (2013 ), Gill, Biger, and Mathur (2011) Hartayo Khafid, and Agustina (2014),

Alima (2015), Yoshendy, Achsani, Maulana (2015), Indrajaya, Herlina, and Setiadi (2011),

Princess (2012), Haron (2014) by selecting the three variables considered to affect the company's

capital structure, as well as using the company's services infrastructure, utilities, and

transportation for the sample to expand research into a five-year period, namely 2011-2015.

Research purposes :

The purpose of this study was to analyse the effect of profitability, asset structure, and the

size of the company's capital structure on a company's infrastructure, utilities, and transportation

in Indonesia Stock Exchange period 2011-2015.

THEORETICAL FRAMEWORK AND DEVELOPMENT HYPOTHESIS

Effek of Variable ROA Against DER

Profitability is also called the Return Of Equity (ROE) or often referred to as Return on

Total Assets (ROA). Profitability is one of the measurements for the performance of a company;

the profitability of a company shows the ability of a company to generate profits for a certain

period at the level of sales, assets, and a specific share capital. Companies that have a high profit

will use debt in low quantities and if the opposite of corporate profits is low, the use of debt as

the cost will be higher "(Kamaludin and Indriani, 2012: 326). Results of research conducted by

the Women (2012), Edison (2013), Haron (2014), and Kanita (2014), said that a profitability

affecting capital structure to have a negative impact, it indicates that the company uses profit or

earnings to finance companies. Based on the description above, it can be made the following

hypotheses:

H1: Profitability significant negative effect on the capital structure company

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Effect of Variable STA Against DER

Industrial companies that the majority of its capital in the form of fixed assets (Fixed

Assets), the company will meet its capital with its own capital while loans only as a complement

to funding only. It can be connected by their horizontal conservative financial structure rule

which states that the amount of equity capital should be at least be able to cover the amount of

fixed assets plus other assets that are permanent. Companies that most of the assets consist of

current assets will prioritize the needs of their funds in accounts payable (Kamaludin and Indri,

2012: 325). Kanita research results (2014: 134) shows that the "positive effect on the asset

structure of the company's capital structure". Results were consistent with the results of research

conducted by Indrajaya, Herlina, and Setiadi (2011), Princess (2012), Edison (2013), and Alima

(2015). Based on the above, it can be made the following hypotheses:

H2: Structure Asset significant positive effect on the capital structure Company

Effect of Variable SIZE Against DER

According Sugiono et al (2013), small companies will tend to have their own capital

costs and the cost of short-term debt that is more than large companies. This is because large

companies require capital costs more than small enterprises. In contrast to large companies,

small companies tend to favor short-term debt than long-term debt. Likewise, large companies

that tend to have strong funding sources, so it is more likely to choose a long-term debt. Hartayo

Khafid, and Agustina (2014) the size of the company has a negative relation to capital structure

while research Indrajaya, Herlina, and Setiadi (2011), Princess (2012), Edison (2013), and

Yoshendy, Achsani, Maulana (2015) showed that the size of the company's positive effect on

capital structures. Based on the above, it can be made the following hypotheses:

H3: Company Size (SIZE) significant positive effect on the company's capital structure

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Concept Framework Research

Based on the hypothesis development framework model can be described research

concept as follows:

Figure 1 Model Framework Research Concepts

RESEARCH METHODS

This research was conducted in the Indonesia Stock Exchange is located at Jalan

Sudirman Kav.52-53 Jakarta 12190 - Indonesia. In this study population who used all the

infrastructure sector service companies, utilities and transportation in the Stock Exchange in

2011-2015. Sampling for this study researchers used purposive sampling method, the sampling

intentionally based on the requirements or criteria required sample. The criteria that must be met

by companies that will be sampled, as follows:

1. The Company's infrastructure sector, utilities and transport in the Indonesia Stock Exchange

has published its financial statements at December 31, 2011 to 2015.

2. The Company's financial statements contain the required variables and their sub-constituent

variables.

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profitability (ROA)

Company size (SIZE)

Assets structure (STA)

Capital structure (DER)

3. In the income statement over the period 2011-2015 the company must have a net income or

net income were minus (loss) of at least four years.

Data analysis method

Data collected in the form of annual financial statements Balance Sheet and Profit / Loss

infrastructure sector service companies, utilities, and transportation listed in Indonesia Stock

Exchange period 2011 to 2015. The data are processed in a computerized, using the statistical

program SPSS v.22.0. Methods of data analysis using multiple linear regression analysis and is

equipped with a descriptive statistical analysis, classic assumption test (test for normality,

autocorrelation, multicollinearity test, heteroscedasticity test), and hypothesis testing (t-test, F,

and test the coefficient of determination).

Multiple linear regression equation used is as follows:

DER=β0+β1 ROA+β2 STA+β3¿¿

Information:

DER = Capital Structureβ0 = Constantβ1, β2, β3 = Regression coefficient of each variableROA = ProfitabilitySTA = Asset StructureSIZE = Size Companiesε = error

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DISCUSSION AND ANALYSIS

Descriptive statistics

Source: Output SPSS 22.0

Based on the results of the calculations in Table 1 it appears that the number of pooled

samples companies with a method in which 12 companies multiplied five-year period of

observation, so that the sample in this study is 60 samples.

Hypothesis Testing

After graduating from the classical assumption include: normality test, multikolenearitas,

heteroskedatisitas test, and autocorrelation test, means that the data has been eligible to be tested

to the next stage of testing hypotheses. In a test of the hypothesis, there is a regression test and

partial test (t), Simultaneous Test (F), Test Determinants (R2).

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Tabel 1 Descriptive Statistics

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

DER 60 .01 13.33 1.7428 1.8919

ROA 60 -.11 .32 .0825 .08190

STA 60 .40 .91 .7767 .11683

SIZE 60 11.00 14.22 12.8062 .87999

Valid N (listwise) 60

1. Multiple Regression Analysis

Tabel 2 Multiple Regression Analysis

From Table 2 can be composed of multiple linear regression equation as follows:

DER = -4,554-6,579ROA+7,564STA+0,49SIZE

From the results of multiple linear regression equation, it can be investigators' analysis

that the constant of -4.554; meaning that if the ROA, the STA and the SIZE value is 0, then the

ratio of DER value is -4.554. ROA regression coefficient of -6.759; meaning that if another

independent variable value is fixed and ROA increased 1%, DER will be decreased by 6.759%.

The coefficient is negative means going negative between ROA DER, the rising ROA then

getting down DER. STA variable regression coefficient of 7.564; meaning that if the value is

fixed and the other variable STA increased 1%, DER will experience an increase of 7.564%. The

coefficient is positive, it means there is a positive relationship between the DER STA, STA gains

further increasing DER. SIZE variable regression coefficient of 0.049; meaning that if the value

is fixed and the other variable SIZE increased 1%, DER will increase by 0.049%. The coefficient

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Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.B Std. Error Beta1 (Constant) -4.554 2.118 -2.150 .037

ROA -6.759 2.360 -.347 -2.864 .006STA 7.564 1.582 .531 4.781 .000SIZE .049 .157 .036 .310 .758

a. Dependent Variable: DER

Source: Ouput SPSS 22.0

is positive; it means there is a positive relationship between SIZE with DER, the ride SIZE

increasing DER.

2. Partial Test Results (t test)Tabel 3 Partial Test Results

The partial test results in Table 3, it can be our analysis that from the calculation of the

partial test obtained t value of -2.864 and significant value of 0.006. Because of the significant

value less than 0.05 means significant effect on the variable ROA DER. From the calculation of

the partial test obtained by value t arithmetic amounted to 4.781 and the significant value of

0.000. Because of the significant value less than 0.05 means that there is significant influence

variable to variable DER STA. From a calculated partial result obtained t count 0.310 and

significant value of 0.758 means that there is no significant influence SIZE variable to variable

DER.

3. Simultaneous Test Results (Test F)

Table 4 Simultaneous Test Results

ANOVAa

Model Sum of Squares df Mean Square F Sig.1 Regression 31.224 3 10.408 15.941 .000b

Residual 30.033 46 .653Total 61.257 49

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Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.B Std. Error Beta1 (Constant) -4.554 2.118 -2.150 .037

ROA -6.759 2.360 -.347 -2.864 .006STA 7.564 1.582 .531 4.781 .000SIZE .049 .157 .036 .310 .758

a. Dependent Variable: DERSource: SPSS 22.0

a. Dependent Variable: DERb. Predictors: (Constant), SIZE, STA, ROA

Source: SPSS 22.0

Based on test results simultaneously in Table 4 show that the results of simultaneous test

or F test showed a value of 15.941 F test obtained with significantly 0,000 less than 0.05. It can

be concluded that the ROA, STA and SIZE simultaneously have a significant influence on the

variable DER. H1 means acceptable and H0 is rejected.

4. Test Results determinant (R2 Test)

Table 5 Determinants Test Results

Model Summaryb

Model R R SquareAdjusted R

SquareStd. Error of the

Estimate Durbin-Watson1 .714a .510 .478 .80802 1.907a. Predictors: (Constant), SIZE,STA,ROAb. Dependent Variable: DER

Source: SPSS 22.0

The percentage of third influence ROA, STA, and the SIZE of the DER can be shown

from the value R2 of the regression model. The analysis showed the value of R square / R2 of

0.510. It is 51% of the variation can be predicted by a variety DER ROA, STA, SIZE. While

another part is 49% DER variation can be explained by other factors.

Discussion

Effek of Variable ROA Against DER

The results of this study showed that the profitability of significant negative effect on the

capital structure means that H1 is accepted. The negative effect of the DER ROA indicates that

the increase in profitability of the company will lower the DER. This result is consistent with the

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pecking-order theory, where a company with high profitability will prefer to use the funds of the

company compared to use the resources from outside the company. This study supports research

conducted by Chen and Chen (2011), Princess (2012), Edison (2013), Haron (2014), and Kanita

(2014) that Profitability significantly negative effect on the capital structure of the company. The

results of this study different from the results of research conducted by Gill, Biger and Mathur

(2011), Hartayo Khafid, and Agustina (2014), Alima (2015), Yoshendy, Achsani, and Maulana

(2015) which states that the profitability of positive effect on the company's capital structure.

Effect of Variable STA Against DER

The results showed that the structure Asset significant positive effect on the company's

capital structure, meaning H2 is accepted. STA positive value indicates the higher structure of

the asset (STA), the higher the value of the company's capital structure (DER). The results of this

study are consistent with the theory put forward by Nidar (2016: 292) states that "a company that

fits their assets as collateral for loans, more use of debt". Matches in this case may be an asset

that can guarantee you such as buildings, machinery and heavy equipment. Fixed assets and

would make a great many guarantees will be used by the company as guarantee so companies

tend to use a lot of fixed assets in debt more than the fixed assets of the company less.

At the company's infrastructure, utilities and transport, where most investment firms in

the form of fixed assets suitable as collateral possibility of making companies use them for

collateral, so companies tend to use a lot of debt to finance the company. Selection of the assets

by the company will also affect the company's capital structure. A greater proportion of assets

would encourage investors to lend, so that, the company will have higher debt. A large

proportion of the assets are good guarantee for the lender. So the ownership of these assets can

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also keep the value of the company's liquidity. The results are consistent with the trade-off theory

in which the size of the positive effect on the company's capital structure. In line with the results

of research conducted by Indrajaya, Herlina and Setiadi (2011), Princess (2012), Edison (2013),

Kanita (2014), and Alima (2015).

Effect of Variable Variable SIZE Against DER

The results showed that the size of the Company's positive effect was not significant,

because the test results were not significant t mean H3 rejected. Company size does not affect the

capital structure of the infrastructure, utilities, and transportation in the BEI in the period 2011-

2015. Inconsiderate size of the company on the capital structure of the sector is likely due to a

large or small scale enterprises will not affect the level of the use of debt and equity. These

results are in line by research conducted by Indrajaya, Herlina, and Setiadi (2011), Princess

(2012), Edison (2013), Yoshendy, Achsani, and Maulana (2015).

CONCLUSIONS, SUGGESTIONS, AND LIMITATIONS OF RESEARCH

Conclusion

Based on the results of research and discussion conducted, the conclusion that in partial

profitability (ROA) significant negative effect on the variable DER, variable asset structure

(STA) significant positive effect on the variable DER, the variable firm size (SIZE) has no effect

on the variable DER.

Suggestion

Researchers then expected to use variable tax, the stability of sales, control, and

management attitudes as a variable to test its effect on the capital structure of the company to re-

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examine the factors that affect the company's capital structure in addition to profitability, asset

structure and the size of company that can be applied both to the company the same business

sector researchers and others this study using purposive sampling suggested for further research

may add to the time period of observation in the study to be longer, for example, the last ten

years. Long period is expected to capture the variables that affect the behaviour patterns of

capital structure becomes more evident in the level of significance.

Research limitations

As the results of research that has been described previously, the limitations of this

analysis, where the research is limited to relatively short observation that is only five years old

with a sample restricted to services infrastructure, utilities, and transportation consists of 12

samples met the study criteria. Besides, factors used are limited only profitability, asset structure,

and the size of the company alone.

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