The Impact of Company Specific Factors and Macroeconomic Conditions on Capital Structure Policy in Textile Industry Listed on the Indonesia Stock Exchange

Sunita Dasman, Erie Febrian, Sulaeman Rahman Nidar, Aldrin Herwany

This study aims to empirically examine the impact of company-specific factors and macroeconomic conditions on capital structure policies in textile companies listed on the Indonesia Stock Exchange (2012-2018) using fixed effect model. Capital structure policies in the Indonesian textile industry are estimated using companyspecific factors: firm size, profitability, tangibility, liquidity, growth opportunity, earnings volatility, asset utilization and retained earnings, as well as macroeconomic conditions: inflation rates, economic growth and interest rates. Empirical results indicate that capital structure policies in textile companies listed on the Indonesia Stock Exchange are influenced by company specific factors and macroeconomic conditions. Company specific factors that influence capital structure policy are firm size, profitability, liquidity, growth opportunity, earnings volatility and retained earnings. Whereas the macroeconomic conditions that contribute to capital structure policy are economic growth. The results found in this study hopefully will help the Indonesian textile industry arrange an optimal capital structure policy in order to fund the company's operational activities and growth opportunities in the most cost-effective way possible. This study also provides an overview of how textile companies in Indonesia carry out capital structure policies while factoring in changes in company-specific factors and macroeconomic conditions.

Volume 12 | Issue 2

Pages: 3457-3470

DOI: 10.5373/JARDCS/V12I2/S20201467