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ABSTRACT
both firm-variant heterogeneity and time- order hypothesis and combination of these
variant heterogeneity. This study tries to fill variables.
this gap by using panel data in analysis of Three-research questions are proposed.
capital structure determinants. First, do the firm-specific factors (such as
This study uses an Indonesian data set to tangibility, growth opportunity, size of the
assess whether capital structure theory is firm, and profitability) influence the firm
portable across firms with different industrial capital structure? Second, do their influences
characteristics, and to find out why some firms have significant differences between crisis
use more debt than others under identical period and before crisis period? Third, does
macro conditions of taxation and interest rates. industrial classification have significant impact
The lack of convincing and conclusive eviden- RQ ILUPV¶ Oeverage?
ce was probably what prompted Miler [1977] The remaining sections of this study are
to put forth his famous irrelevancy theory. organized as follow. Section 2 presents an
0LOOHU¶V LUUHOHYDQFH KROGV WKDW DQ RSWLPDO overview of literature on capital structure.
capital structure exists only for the aggregate Section 3 describes data and research
economy. Theories of optimal capital structure methodology. Section 4 reports results of the
survive not because they do any good but statistical analyses. Section 5 summarizes the
because they do not harm. There are at least main consideration of the study.
two implications of this theory. First, the
aggregate amount of debt used by corporations LITERATURE REVIEW
should be correlated with the appropriate There are several definitions of capital
macro variables such as tax rates, interest rates, structure or leverage. The definition of
financial institutions type, and second, the leverage depends on the objective of analyses
distribution of the firm debt ratios around this (Rajan and Zingales [1995]). For example, for
aggregate should be random. agency problems related studies of capital
However, inter-industry differences of debt structure, leverage may be defined as debt-to-
ratios or leverage ratios and their correlation firm value ratio, debt-to-total assets ratio, total
with firm characteristics provide evidence liabilities-to-total assets, or total debt-to-net
against such a random distribution (Titman and assets. For study of leverage and financial
Wessels [1988]; Balakrishnan and Fox [1993]; distress, interest coverage ratio is more
Demirgüç-Kunt and Maksimovic [1994]; suitable. Further, debt measures could be
Rajan and Zingales [1995]; Hussain and divided into its various components and
Nivorozhkin [1997]; Booth, Aivazian, numerator and denominator could be measured
Demirgüç-Kunt and Maksimovic [2000]; in book value and market value terms.
Purba [2001]; Bevan and Danbold [2001]). Prior research for capital structure
Important theories of capital structure that determinants has indicated that both the level
attempt to explain these differences have of total leverage and the determinants of
included additional variables, such as; agency leverage (RZ [1995]) vary significantly
cost (Jensen and Meckling [1976]), non-debt depending on the definition of leverage
tax shields (DeAngelo and Masulis [1980]), adopted. In this paper, therefore the analyses
under-investment cost, assets substitution, and are based on two components of debt, rather
over-investment cost due to shareholder- than on more aggregate leverage measure (i.e.
bondholder conflict (Myers [1977]), asym- total leverage). Debt is decomposed into three
metry information problems between insider categories: total debt (or total leverage), long-
and outsider (Ross [1977], Leland and Pyle term debt, and short-term debt. Both book
[1977], Myers and Najluf [1984]), pecking
2003 Santi 245
value and market value is used in measure the variables or the determinant of capital structure
level of total leverage, long-term debt, and and discuss below the theoretical and empirical
short-term debt. considerations underlying each one of them.
There are at least three main theories Tangibility: According to Rajan and
considered as theoretical model of capital Zingales (1995), tangibility is the important
structure, i.e. static trade-off theory (STO), variable in firm financing decision, because
agency theory model (ATM), and pecking tangible assets act as collateral and provide
order theory (POH). In STO, capital structure security to lenders in the event of financial
move toward certain target that convey the distress. Typically, intangible assets contain
type of firm assets, profitability, business risk, more asymmetric information about the value
tax rate, and bankruptcy risk. In ATM, the than tangible assets; it is easier for the lender
potential conflict among manger, shareholders, to establish the value of tangible than
and bondholders determine optimal capital intangible assets. Moreover, it is highly likely
structure minimized agency costs. Asset that in the face of probable bankruptcy,
characteristics, and firm growth opportunities intangible assets like goodwill will rapidly
are important factors in agency cost. While in disappear, thus diminishing the net worth of a
POH, market imperfection becomes the main firm and further accelerating its bankruptcy
issue. Transaction cost and asymmetric probability. Hence, one could argue that firms
information try to link between firm ability to with a greater percentage of their total assets
start a new investment and internal funds. If composed of tangible assets will have a higher
they should explore external sources, they capacity for raising debt. Collaterals also
more likely to issue debt then equity because protect lenders from moral hazard problem
of lower asymmetric information in debt than cause by the shareholders-lenders conflict
in equity issue. (Jensen and Meckling, 1976). Thus, firms with
The selection of independent variables as higher tangible assets are expected to have
the determinants of leverage is primarily high level of debt.
guided by the result from previous empirical Some empirical studies report a statistically
studies in some developed and developing significant relationship between tangibility and
countries. According to prior research, several total debt-to-total assets ratio (Titman and
variables explain variations in leverage. Wessels [1988]; Rajan and Zingales [1995];
Titman and Wessel (1988) used assets struc- Booth, Aivazian, Demirgüç-Kunt and
ture, firm growth, non-debt tax shields, and Maksimovic [2000]; Purba [2001]). While,
firm uniqueness as explanatory variables of Bevan and Danbold [2001] suggest that the
leverage level. Harris and Raviv (1991) relationship between tangibility and leverage
suggest that leverage will increase as fixed depends on the definition of leverage adopted.
assets, non-debt tax shield, investment They found positive correlation between
opportunities, and size of firm increase; and tangibility and long-term debt elements; a
will decrease as profitability, R&D expend- negative correlation is observed for short-term
iture, advertising expenditure, bankruptcy debt elements. Other study (Demirgüç-Kunt
probability, product uniqueness increase. and Maksimovic [1994]) found that tangibility
Rajan and Zingales (1995) found that debt to has positive correlation on total debt and long-
total asset ratio is positively correlated with term debt, but negative correlation on short-
tangibility and size of firm; and negatively term debt.
correlated with growth opportunity and Growth opportunity. Myers [1977] argues
profitability. This study used these four Rajan that the potential for under investment and
and Zingales variables as independent resources diversion is most severe for
246 Jurnal Ekonomi & Bisnis Indonesia Juli
positive relationship only for the export- only one firm in sample (mining industry) is
oriented firms. There are also evidences that also excluded. The remaining industry sectors
larger firms tend to use more long-term debt, are as follow:
trade credit, short-term securitised debt, but 1. S1: agriculture industry.
less short-term bank financing than small firms
2. S2: basic industry and chemical industry.
(Danbold and Bevan [2001]).
3. S3: miscellaneous industry.
Profitability. Modigliani and Miller had
made the interest tax-shield explanations; firms 4. S4: consumer goods industry.
with high profits would employ high debt to 5. S5: real estate and property industry.
gain tax benefits. Further, in the presence of 6. S6: infrastructure, utilities, and transpor-
asymmetric information profitable firms may tation industry.
signal quality by leveraging up (Jensen, 1986).
7. S7: trade and services industry (not inclu-
If these are true, then there will be a positive
ding investment companies).
relationship between leverage and profitability.
Contrary, the pecking order or asymmetric The remaining firms after eliminating outlier
information hypothesis of Myers and Majluf are 87 for each year.
[1984] postulates that companies prefer The entire period from 1989 to 1999 is
internal financing to debt or equity. The divided into two sub periods: before crisis
interest tax-shield may also not work for those period (1989-1996) and crisis period (1997-
firms that have other avenues, like 1999). The variables are calculated as follow:
depreciation, to shield their taxes (DeAngelo
Dependent variables measure leverage level
and Masulis [1980]). Firms with higher
are:
profitability will employ higher retained
earning and less debt. Most empirical studies 1. Total leverage in book values. LEV1B =
confirm the pecking order hypothesis (Titman [total debt / total assets].
and Wessels [1988], Baskin [1989], Demirgüç- 2. Total leverage in market values. LEV1M =
Kunt and Maksimovic [1994], Rajan and [total debt / (total assets ± book value of
Zingales [1995], Purba [2000], Bevan and equity + market value of equity)].
Danbold [2001], Booth et.al. [2001]). 3. Long-term debt ratio in book values. LTDB
= [total long-term debt / total assets].
DATA AND METHODOLOGY
4. Long-term debt ratio in market values.
This study use data of ICMD published by LTDM = [total long-term debt / (total assets
ECFIN.1 The selected time-period from 1989 - book value of equity + market value of
to 1999 is intended to capture the differences equity)].
in economic conditions of Indonesian economy 5. Short-term debt ratio in book values. STDB
(before and after crisis) and data availability = [total short-term debt / total assets].
consideration. Companies that exist throughout 6. Short-term debt ratio in market values.
the 10-year period with no missing data are STDM = [total short-term debt / (total
included in the study. Firms are grouped into assets - book value of equity + market value
nine industrial sectors. These groups are based of equity)].
on JSX classification. Firms in the financial,
securities, and investment sector were Independent variables:
excluded from sample. The sector that contains 1. Tangibility. TAN = [net depreciable fixed
assets / total assets]. We hypothesized that
1
Authors express the gratitude to Wawan Kurniawan,
ECFIN Journal, for making data available.
248 Jurnal Ekonomi & Bisnis Indonesia Juli
tangibility is positively related to all most papers employing time series do not ma-
leverage measures. ke use of this important source of information.
2. Growth opportunity. MTB = [(total assets ± Since there is cross-sectional heterogeneity,
book value of equity + market value of the GLS estimations rather than OLS
equity)/total assets]. We hypothesized estimations is used in this study. By using first
empirically that growth opportunity has order autoregressive in the model, first-order
negative relationship with total leverage positive serial correlation can be removed in
and long-term debt ratios, but positively the GLS model. After looking at table 2, the
related to short-term debt ratios. matrix of correlation coefficients between the
3. Size. SIZEA = [log (sales)]. We hypothe- dependent and independent variables, we find
sized size has a positive relation with total that most cross-correlation terms are fairly
leverage ratio and long-term debt ratios, small, thus giving no cause for concern about
and short-term debt ratios. problem of multicollinearity among variables.
4. Profitability. PROA = [EBIT/total assets]. Four steps are used in the estimation
We hypothesized profitability is negatively process. First, pooled GLS regressions are
related to each leverage measures. estimated. Pooled GLS model might produce
5. Industrial dummies. In order to control for biased result due to its failure to control for
any industry-specific effects that may not time-invariant firm-specific heterogeneity. The
be captured by the variables above, industry pooled GLS model analysis yields results that
dummies are also included as independent are generally consistent with other cross-
variable. sectional results. Based on Hausman test, fixed
6. Time dummy. DUMTHA = {zero if before effect GLS models are used in the second step
crisis period; and one if crisis period}. to counter for time-invariant firm-specific
heterogeneity. Third, fixed effect GLS models
This study assumes that the differences in are extended by incorporating time dummy and
debt ratios could result from a fLUP¶V G\QDPLF its interactions with each independent
through different times. Let the capital variables. This analysis of the dynamics in the
structure or leverage, Lit, for firm i at period t, panel is intended to control both firm variant
Lit = F (Xit, Di, Dt) (1) and time variant heterogeneity. This process
could capture the dynamic on all variables
be a function of a vector of firm and time influence capital structure. Therefore, this
variant variables determining capital structure study let not only intercept but also slope vary
(Xit), and Di and Dt. Di and Dt are firm-specific in the regression. Fourth, the pooled GLS
and time-specific effects represented by firm regressions with industrial dummy are made to
and time dummy (or time trend) variables conserve degrees of freedom of the firm-
respectively. To conserve degrees of freedom specific effects (Di) in fixed effect GLS
the firm-specific effects (Di) are replaced by models. Therefore, we could see the industry
industrial sector dummy variables. Thus, the classification effect on leverage.
leverage is allowed to vary across firms and
RYHU WLPH 6LQFH IDFWRUV WKDW GHWHUPLQH D ILUP¶V RESULTS AND DISCUSSION
leverage may change over time, it is likely that
the optimal debt ratio may move over time Table 1 provides means of each leverage
even for the same firm. This captures the measures for 1989-1999 periods. On the
dynamic nature of the capital structure pro- average, the JSX companies employ relatively
blem, which has hitherto been overlooked in high level of total debt. The total debt ratio is
the literature. By taking averages over time, around 53.22% in book value or 53.83% in
market value for entire 10-years period. The
2003 Santi 249
short-term debt ratio is twice of the long-term Pooled GLS Estimation Result
debt ratio. The distribution of ratios is skewed Table 3 panel A presents the result of the
toward lower end, except for total debt in pooled GLS regression analysis. At the
market value. The average market value ratios aggregate level, we find that the regressions
are higher then the book value ratios. These are statistically significant, and we are able to
results support the World Bank report that reject the null hypothesis of joint significance
Indonesian firms face not only an increasing of the coefficients at less than the one percent
amount of external debt but also the shorter level. Although, the adjusted R2 measure
maturity of their debt. differs significantly among them, from a low
Each debt ratios in table 1 show substantial of 48.31% for market value of long-term debt
change during before crisis period (1990-1996) ratio (LTDM), to a high 92.63% for book
and crisis period (1997-1999). During the value of total leverage ratio (LEV1B).
crisis period, the Indonesian economy suffered Tangibility: This study finds a statistically
a drop in exchange rate where the USD soared significant positive relationship between tangi-
and the market price of shares fell. Unfortu- bility and all types of book and market value
nately, their debt was mostly USD nominated leverage ratios. This finding supports collateral
and part of them was short-term debt. value explanation. This suggests that tangible
Table 2 provides correlation matrix for the asset could be collateral and reduce agency
pooled sample of 870 observations. Growth conflict between bondholders or lenders and
opportunity and profitability are positively shareholders. This result also suggests that
correlated with size of the firm. This implies firm with more tangible assets tend to borrow
that larger firms tend to grow fast and have more than firm with less tangible assets
higher profitability. Tangibility has a negative Growth opportunity: The multivariate-
correlation with profitability and growth pooled OLS regression results show that the
opportunity. coefficient of MTB (as a proxy of growth
Tangibility has a positive correlation with opportunity variable) is negative significant
total leverage ratio and long-term debt ratio, throughout, except for STDB. This study finds
but negative correlation with short-term debt a significantly positive relationship between
ratio. Growth opportunity is significantly and MTB and STDB. These confirm the pecking
negatively correlated with all market leverage order theory of Myers [1977] that suggest that
ratio (LEV1M, LTDM, and STDM). It does companies with high market-to-book ratio
not have significant correlation with book would have lower long-term debt ratios and
leverage ratio, except for STDB. Size is leverage ratios, and used more equity or short-
positively correlated with all leverage ratios. term debt due to the under-investment
This study also observed that profitability has problem.
negative association with all leverage Size: Except for LTDB, This study finds
measures. Finally, this study does observe that that size of the firm has significant positive
book leverage ratios are highly correlated with influence to all type of book and market
market leverage ratios. leverage ratios. The positive influence of size
Table 3 presents regression results. We first to leverage ratios confirms the hypothesis that
discuss result of pooled GLS regression. Then larger firms tend to be more diversified and
second, we continue to discuss result of fixed less prone to bankruptcy and the direct cost of
effect GLS model. Afterward, we will explain issuing debt or equity is smaller. This is
the finding of fixed effect GLS regression with consistent with the trade-off theory.
time dummy variable and time dummy
interaction variables.
250 Jurnal Ekonomi & Bisnis Indonesia Juli
Variables LEV1B LEV1M LTDB LTDM STDB STDM TAN MTB SIZEA PROA
LEV1B 1.000
LEV1M .708a 1.000
LTDB .357a .285a 1.000
LTDM .296a .409a .899a 1.000
STDB .751a .513a -.267a -.277a 1.000
STDM .528a .739a -.286a -.216a .788a 1.000
TAN .120a .140a .389a .404a -.144a -.138a 1.000
MTB .022 -.505a -.030 -.202a .039 -.375a -.073b 1.000
SIZEA .330a .240a .252a .265a .160a .064b .106a .118a 1.000
PROA -.247a -.190a -.146a -.144a -.139a -.090a -.111a .109a .104a 1.000
a denotes correlation is significant at the 0.01 level (1-tailed).
b denotes correlation is significant at the 0.05 level (1-tailed).
Profitability: Pooled GLS results indicate a (but firm-specific) heterogeneity entails that
significant negative relation of profitability the disturbance term in a classical linear
with book and market value of short-term regression will incorporate time-invariant
ratios and total leverage ratios. Profitability omitted factors. Consequently, if these omitted
seems to be the most dominant determinant of factors are contemporaneously correlated with
total leverage ratios and short-term debt ratios the included independent variables ± as is the
of Indonesian firms in the pooled GLS underlying assumption of the fixed effects
regressions as it generally has high beta model ± parameter estimation will be biased
coefficients and t-statistics that are statistically and inconsistent. Hence, inference based upon
significant at 1% level. This study also finds these parameters estimation may lead to
that profitability has a positive relation to book inappropriate conclusions (Hsiao [1986],
and market value of long-term debt ratio. This Baltagi [1995]). By transforming the model to
positive relation seems contradict with the eliminate time-invariant (firm-variant) effects
pecking order theory. We still suspect this that vary by firm the parameters of the fixed
positive relationship because it might have the effects model are BLUE under least square
correlation between the firm specific effect and estimation.
profitability variable. This correlation might Comparison of the results presented in
reverse the sign. It will discussed in the fixed Table 3 panel A and B suggest that the
GLS estimation result section. explanatory power of regressions are higher
under fixed effects GLS estimation than under
Fixed Effect GLS Estimation Result pooled GLS estimation. Nevertheless, This
At the second stage of the analysis, this study continues to be able to reject joint
study will utilize the panel nature of the data significance of the coefficients at less than the
set and employ fixed effects regression in one percent level in all equations. Moreover,
order to control for underlying time-invariant the computed Hausman statistics reject random
heterogeneity among firms in the dataset. The effects in favor of fixed effects model.
failure to control effectively for time-invariant
252 Jurnal Ekonomi & Bisnis Indonesia Juli
Tangibility: This study did not find the Size: The influence of company size on
influence of tangibility on the level of the each of the leverage measures does not change
leverage measures to reverse sign when using substantially under the two different estimation
fixed effects GLS rather than pooled GLS. It is techniques, although there are some slight
only find changes in the magnitude influence changes in the magnitude and the significance
of tangibility on the leverage measure. of the coefficient. The missing variable bias of
Furthermore, the significance of the influence pooled GLS model appears to have some
of tangibility on short-term debt ratio is influence on the estimation of relationship
increase under fixed effects GLS regression. between size and LTDB. Once time-invariant
The positive sign of tangibility coefficient in heterogeneity is controlled for, the influence of
all leverage equations suggesting that collateral size on LTDB is positive but insignificant
is not only correlated with the level of long- under pooled GLS model becomes significant
term debt, but is also a determining factor in under fixed effect GLS model. Controlling for
obtaining short-term debt finance. It means firm specific effects, it is found a positive
that lenders condition their lending ± whether relationship between size and all leverage
long-term or short-term debt ± on the measures.
availability of collateral value. The positive Profitability: After controlling for time-
tangibility coefficient for short-term debt ratios invariant heterogeneity leads to significant
contradicts the maturity principle. However, changes in magnitude and the statistically
the results may be time-specific, with lenders significance of the regression coefficients
having become increasingly cautious in their generally (most notably in the case of LTDB,
lending policies following the Indonesian LTDM and STDM), polarity remains constant
economic crisis of the mid 1997. We turn to save for LEV1B and LEV1M. It is observed
this point in the Dynamics in Fixed Effects that the influence of profitability on long-term
Estimation section below. debt reverse sign, from positive under pooled
Growth opportunity: The result show that GLS model become negative under fixed effect
growth opportunity has a significant negative GLS model. The statistically significance of
influence on the level of total leverage (both negative influence of profitability on LTDB
LEV1B and LEV1M), and on the level of and LTDM are slightly change, from 1% level
long-term debt (both LTDB and LTDM). of significance under pooled GLS model
Comparing the coefficients of the pooled GLS become 10% level of significance under fixed-
and the fixed effects GLS model illustrates that effects GLS model. These suggest that this
controlling for underlying firm-variant study still found a negative relationship
heterogeneity in the sample has a significant between profitability and all leverage
impact on the results. This study finds that measures, thus this study still able to accept the
previous positive correlation between growth pecking-order explanation for all leverage
opportunity and STDB become insignificant measure.
under fixed effects GLS regression. Therefore, The result of this section illustrate that
controlling for time-invariant (firm-variant) controlling for underlying time-invariant
heterogeneity eliminates the influence of heterogeneity through estimating a fixed
growth opportunity upon STDB. effects GLS model change several of the
Consequently, the hypothesis of positive results that were obtained under pooled GLS
relationship between growth opportunity and model. However, control for time-variant
short-term debt is rejected, but for different heterogeneity, whether there are any dynamic
reasons than previously. factors that affect all firms generally, are not
254 Jurnal Ekonomi & Bisnis Indonesia Juli
established yet. We will turn to this in the debt) and with shorter debt maturity, and the
below section crisis hurt them more.
A superficial glance at table 4 reveals a
The Dynamics in Fixed Effects GLS large number of significant time interaction
Estimations coefficients, suggesting some degree of
In this section, time-variant heterogeneity dynamic dependence among the coefficients.
is controlled to take into account all possible This is confirmed when we note that overall
dynamics in influence of included variables adjusted R2 measure for this set regressions is
through periods. One possible method to do typically larger than under fixed effects
this would be to use variable intercept and estimation without time interactions. Even so,
slope model (Bevan and Danbold [2001]). This this study also observes a decline in the
approach effectively assumes that the time associated F-statistic indicating that the loss of
effects can be captured by shifts in both degree of freedom is not offset with increased
intercept and slopes regression. We follow the explanatory power. However, the results of
work of Bevan and Danbold [2001] extended Wald coefficient test for joint insignificance of
the fixed effect model by introducing time the interactive time dummies, presented in
dummy variables for two periods (before and table 4, rejects of joint insignificance.
during crisis) and its interaction with included Tangibility: The introduction of dummy
independent variables. By doing this allow us crisis period has limited the impact of several
not only test for general time-specific (but included independent variables on leverage
firm-invariant) shifts in leverage level, but also level. The influence of tangibility on LEV1B
to determine whether the influence of included and LEV1M before crisis period does not
independent variables on leverage level change significantly during crisis period. The
changes through time. The results of the coefficients of tangibility on STDB and STDM
regressions are presented in Table 4. equations before crisis period are 0.1395 and
From table 4, the coefficient of dummy 0.1609 respectively, becomes 0.0690 and
crisis period is significant at the 1% level of 0.0119 during crisis period.2 This means that
significance. The coefficient of dummy crisis there was declining in magnitude influence of
period may be interpreted as the deviation of tangibility on short-term debt during crisis
leverage level during crisis period from the period. However, this study observes the
level of leverage before crisis period. It is influence of tangibility on long-term debt is
observed that the coefficients of dummy crisis positive insignificant in before crisis period,
period are positive significant in LEV1B, become positive and significant during crisis
LEV1M, STDB, and STDM equations, and period.
negative significant in LTDB and LTDM.
These mean that Indonesian firms used more
debt in their capital structure and more short-
term debt in crisis period (partly the increase
may be due to exchange rate swings). Even so,
this study found a significant negative
coefficient of dummy crisis period, indicating
that Indonesian firms start to reduce their long
term-debt level in their capital structure at
early crisis period. The result also supports the
World Bank report that Indonesian firms are 2
The coefficient of tangibility in crisis period is
highly relied on debt (especially on external
computed as sum of E TAN and ETANA.
2003 Santi 255
Table 4. Summary of The Regression Results for Dynamics in Fixed Effect Model
FIXED EFFECT GLS MODEL WITH DUMMY VARIABLE AND ITS INTERACTION WITH
INCLUDED INDEPENDENT VARIABLES
Variables LEV1B LEV1M LTDB LTDM STDB STDM
EDUMTHA Dummy crisis period 0.4440a 0.3710a -0.0099 -0.0514a 0.2749a 0.4299a
(0.07218) (0.05894) (0.00881) (0.01099) (0.04523) (0.06202)
ETAN Tangibility 0.1852a 0.2355a 0.0110 0.0087 0.1395a 0.1609a
(0.02245) (0.02919) (0.01236) (0.00643) (0.01565) (0.02047)
ETANA Tangibility * DUMTHA -0.0272 -0.0335 0.0195b 0.0265a -0.0705b -0.1490a
(0.03747) (0.034201) (0.00782) (0.00983) (0.03246) (0.03435)
EMTB Growth opportunity -0.0163a -0.2298a -0.0024a -0.0119a 0.0017 -0.1187a
(0.00348) (0.01454) (0.00069) (0.00082) (0.003738) (0.01065)
EMTBA Growth opportunity * -0.0138 -0.0204 -0.0020b -0.0052a 0.0003 -0.0182
DUMTHA (0.00852) (0.01856) (0.00101) (0.00127) (0.00614) (0.01382)
ESIZEA Size 0.1248a 0.0774a 0.0144a 0.0083a 0.0315b 0.0391a
(0.01492) (0.01507) (0.00319) (0.00386) (0.01458) (0.01461)
ESIZEAA Size *DUMTHA -0.0554a -0.0323a 0.0017 0.0106a -0.0320a -0.0471a
(0.01285) (0.00864) (0.00172) (0.00228) (0.00857) (0.01036)
EPROA Profitability -0.3183a -0.1365c -0.0448a -0.0274a -0.0554 -0.0479
(0.06483) (0.07909) (0.00675) (0.00952) (0.04414) (0.073596)
EPROAA Profitability * -0.1129 -0.2926a -0.0447a -0.0277a -0.3790a -0.3100a
DUMTHA (0.08254) (0.08815) (0.00732) (0.010576) (0.05035) (0.09033)
AR (1) 0.5972a 0.3886a 0.4590a 0.3733a 0.5422a 0.4214a
(0.02925) (0.03014) (0.02916) (0.03164) (0.03504) (0.033329)
R2 0.9399 0.9291 0.6862 0.6257 0.9029 0.8430
Adj. R2 0.9313 0.9190 0.6421 0.5732 0.8891 0.8206
F-statistic 1171.070 978.733 162.763 116.251 696.714 401.997
F-prob 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
NT 771 769 765 765 771 771
Hausman specification test for fixed versus random effect panel estimation
F2 370.73878 3987.8019 312.62609 290.78721 151.97915 103.08882
p-value 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Wald coefficient test for joint significance of time interaction variables
F-statistic 37.30495 7.360731 29.31303 5.760971 46.16952 14.42020
Probability 0.000000 0.000008 0.000000 0.000144 0.000000 0.000000
Chi-square 149.2198 29.44292 117.2521 23.04389 184.6781 57.68081
Probability 0.000000 0.000006 0.000000 0.000124 0.000000 0.000000
First line in each row of included independent variables represents t-statistics of the coefficients. Standard
error is in parenthesis.
a denotes coefficient is significant at the 0.01 level.
b denotes coefficient is significant at the 0.05 level.
c denotes coefficient is significant at the 0.10 level.
256 Jurnal Ekonomi & Bisnis Indonesia Juli
3
The coefficients of size in STDB and STDM equations
during crisis period are ±0.0005 and ±0.0080
respectively.
2003 Santi 257
Table 5. Summary of Regression Result of Capital Structure Determinants and Industrial dummies
on capital structure.
Variables LEV1B LEV1M LTDB LTDM STDB STDM
D* Common intercept - - - - - -
ETAN Tangibility 0.1684a 0.1723a 0.0484a 0.0454a 0.0534a 0.0326
(0.023824) (0.031817) (0.004891) (0.003927) (0.014541) (0.022772)
EMTB Growth -0.0143a -0.2365a -0.00413a -0.0125a 0.0092a -0.1300a
opportunity (0.004893) (0.011730) (0.000528) (0.000349) (0.003528) (0.009467)
ESIZEA Size 0.0857a 0.0530a 0.0129a 0.0050b -0.0099 -0.0118
(0.017047) (0.010632) (0.002761) (0.002167) (0.020561) (0.018715)
EPROA Profitability -0.4318a -0.3504a -0.0023 -0.0044 -0.2486a -0.1792a
(0.055431) (0.056800) (0.003800) (0.003486) (0.047635) (0.065199)
EDUMTHA Dummy years 0.0847a 0.1244a -0.0010 -0.0022a 0.0244a 0.0496a
after crisis (0.008576) (0.009447) (0.000649) (0.000498) (0.007283) (0.009901)
D1 Industry 1 0.2295 0.5651a -0.0517a 0.0040 0.7709 0.6832c
(0.139504) (0.098563) (0.015201) (0.009948) (0.746276) (0.397764)
D2 Industry 2 0.0267 0.4445a -0.0766a -0.0169 0.3418b 0.4723a
(0.105249) (0.069164) (0.015260) (0.010685) (0.137799) (0.121101)
D3 Industry 3 0.1224 0.5306a -0.0759a -0.0065 0.6369a 0.6869a
(0.104191) (0.071714) (0.017265) (0.012202) (0.144959) (0.113637)
D4 Industry 4 0.0310 0.5520a -0.0435b 0.0318b 0.4712a 0.7069a
(0.105134) (0.063894) (0.018031) (0.013653) (0.141539) (0.118368)
D5 Industry 5 0.4358a 0.6476a 0.3184a 0.3338a 0.4926b 0.4111a
(0.143189) (0.066292) (0.105960) (0.086786) (0.191725) (0.108019)
D6 Industry 6 0.0526 0.3494a 0.4065b 0.1381 0.0933 0.2358b
(0.147668) (0.095182) (0.178010) (0.130158) (0.149501) (0.112863)
D7 Industry 7 0.2718b 0.5509a -0.0552a 0.0023 0.2048b 0.5275Ba
(0.117554) (0.067458) (0.015020) (0.010811) (0.103488) (0.113841)
AR(1) 0.8759a 0.7120a 0.8556a 0.8054 0.9247a 0.8457a
(0.018393) (0.025319) (0.017133) (0.020861) (0.015627) (0.020410)
R2 0.9156 0.9123 0.6666 0.651902 0.8573 0.7291
Adj. R2 0.9142 0.9108 0.6612 0.643858 0.8550 0.7248
F-statistic 639.1759 612.5045 122.3060 162.3896 385.3481 172.6697
F-prob 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
NT 720 720 747 747 783 783
Wald coefficient test for industrial dummy
F-statistic 3.340604 138.7749 13.47162 16.81073 7.570814 15.63985
Prob. 0.001631 0.000000 0.000000 0.000000 0.000000 0.000000
F2 23.38423 971.4246 94.30133 117.6751 52.99570 109.4790
Prob. 0.001461 0.000000 0.000000 0.000000 0.000000 0.000000
First line in each row of included independent variables represents t-statistics of the coefficients. Standard
error is in parenthesis.
a denotes coefficient is significant at the 0.01 level.
b denotes coefficient is significant at the 0.05 level.
c denotes coefficient is significant at the 0.10 level.
258 Jurnal Ekonomi & Bisnis Indonesia Juli
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their correlation with firm characteristics. Maksimovic (1994). Capital Structure in
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RI 0LOOHU¶V GHEW LUUHOHYDQFH WKHRU\ Country Cases. Policy Research Working
We suggest that further research ers make a Paper #1320, World Bank, Policy
deeper investigation on the influence of Research Department, Washington, DC.
Indonesian financial market development to _____ (1996). Institutions, Financial Markets,
ILUPV¶ FDSLWDO VWructure. For example, the DQG )LUPV¶ &KRLFH RI 'HEW 0DWXULW\.
influence of capital market, bond market, and Policy Research Working Paper 1321,
banking sector development, both in their sizes World Bank, Policy Research Department,
and activities, as sources of fund or supply Washington, DC.
VLGH RQ ILUPV¶ FDSLWDO VWUXFWXUH FKRLFHV _____ (1998). Law, Finance, and Firm
Growth, Journal of Finance 53, 2107-
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