JEFMS Journal

ABSTRACT:

One of the key decisions faced by financial managers in relation to company operations is funding decisions. The funding decision is seen from the capital structure, good capital structure is the optimal capital structure. The optimal capital structure is a condition in which a firm can use a combination of debt and equity ideally and balancing the value of the firm and the cost of its capital structure. The cost of capital arose is a direct consequence of the decision taken when the manager uses the debt in which there will be the capital cost of interest expense required by creditor. However, if the manager decides to use internal funds, an opportunity cost of funds will be incurred.

This research that was used is quantitative data with financial data from the site Indonesian Stock Exchange. The companies that was used is Non-Bank Financial Institutions which published financial statements of the period 2014 – 2016. This research aims to know the effect of profitability and asset structure to capital structure on Non-Bank Financial Institutions Listed on Indonesian Stock Exchange.

Analysis method that was used in this thesis is panel data regression with statistical software Views 7 Version. The sample was 30 companies by purpose sampling technique. The independent variables that used are profitability and asset structure, and the variable dependent is capital structure.

The results show that profitability partially has insignificant negative effect on capital structure with value of -0.469. Asset structure partially has insignificant positive effect on capital structure with value of 0.945. Profitability and asset structure during 2014 – 2016 simultaneously has significant effect on capital structure on Non-Bank Financial Institutions with value of 0.018. The companies are expected to pay attention to profitability, as it increases profitability equally by increasing internal funding. The used of long term debt align with their firm size because debt will also have its effect to all operational aspect so that asset structure will become optimal.

KEYWORDS:

Profitability, Asset Structure, Capital Structure, Non-Bank Financial Institutions.

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