The Effect of Capital Structure in The Context of Foreign Financing on The Financial Performance

Abstract

This study examines the effect of capital structure in the context of foreign financing on the financial performance of energy sector companies in Indonesia from 2018 to 2021. The independent variables used in this study are the capital structure proxied by the debt-to-equity ratio (DER), debt in foreign currency (FD), and debt in the foreign currency local (DD). The dependent variable used in this study is the company's financial performance as measured by Return on Assets (ROA) and Return on Equity (ROE). The control variables used in this study are Growth and Size. The type of data used in this study is panel data with a total of 152 observations, where the number of companies used is 38 companies and the number of periods is four years. In analyzing the effect of the independent variable on the dependent variable, testing is used Feasible Generalized Least Square. They were then tested in this study using Stata 14 software. This study's test results indicate a negative effect debt to equity ratio on financial performance as measured by ROA and ROE. Then the results of this test show a positive effect of debt in foreign currency on financial performance as measured by ROA and ROE. However, in testing the effect of debt in local currency, it was found that there was no significant effect on the company's financial performance.