Managerial experience, fixed asset, and capital structure

Abstract

This study empirically investigates the effect of managerial experience on capital structure and the role of fixed assets as the moderating variable in this relationship. Our research sample is all firms in the infrastructure, utilities, and transportation sectors listed at the Indonesian Stock Exchange in 2014-2018 based on the purposive sampling method. We analyze the research data with the ordinary least square (OLS) method. The results of our regression analysis show that managerial experience negatively affects capital structure. However, we find that fixed assets do not moderate the relationship between managerial experience and capital structure. Further analysis indicates that fixed assets moderate the relationship between managerial experience (MANXEP) and capital structure when MANEXP is measured with internal experience but not with the external one. Besides, the relationship between managerial experience and capital structure is significant when the fixed asset ratio is moderate or high. Overall, these findings indicate that studies on the effects of top managers/ CEOs’ characteristics on firms’ policies or performance should obtain and analyze more detailed measures of the CEOs’ characteristics or the context variables.