The influence of uncertainties on leverage and investment decisions of non-financial firms in Indonesia

Abstract

This study aims to analyse the effect of each uncertainty (firm-specific, market, capital asset pricing model (CAPM)-based, and economic policy uncertainty) on the leverage and investment decisions of non-financial companies in Indonesia. The variables used in this study are leverage, investment, firm-specific uncertainty, market uncertainty, CAPM-based uncertainty, economic policy uncertainty, sales growth, cash flow, Tobin’s Q, and firm size. Researchers used panel data on 224 non-financial companies listed on the Indonesia Stock Exchange from 2009–2018 with variable related data for at least three consecutive years. This research uses the least-squares research method. The results indicate that the four variables used in this study have a significant influence, in groups of variables, on leverage and investment decisions in each non-financial sector, particularly the manufacturing sector, and will remain constant if the four uncertainties are combined in the same situation.