The Impact of Capital Structure on Financial Performance of the listed Agriculture Companies in Indonesia

Abstract

Objective - The paper analyzes the impact of capital structure on the financial performance of the agriculture companies listed in Indonesia Stock Exchange. In addition, this paper also analyzes which one between equity and asset that is able to cover the firm's debt. Methodology/Technique - The time scope of this thesis is taken from 2010 until 2014 with 16 agricultural companies listed in Indonesia Stock Exchange as the samples. The independent variable in this thesis is capital structure that is measured by Debt Equity Ratio and Debt Asset Ratio. The dependent variable is financial performance that is measured by GPM, NPM, ROA, ROE, and EPS. The methodology used in this thesis is multiple regression and the data is processed by using SPSS. Findings - The result of this paper shows that Debt Equity Ratio, which is one of the indicators of capital structure, has a significant impact and a negative relationship with ROE. Novelty - This study also finds that rather than the land, the value of the company's building contributes more significantly towards the agriculture company's total assets which are more able to cover the debt. Type of Paper - Empirical Keywords : Capital Structure; Financial Performance; Agricultural Company, Profitability Ratio; Debt Equity, Debt Asset