Title: Capital structure determinants and the speed of adjustment towards capital structure target: evidence from Indonesian state-owned enterprises

Authors: Subiakto Soekarno; Mandra Lazuardi Kitri; Suryo Utomo

Addresses: School of Business and Management, Institut Teknologi Bandung (ITB), Jalan Ganesha 10, Bandung 40132, Indonesia ' School of Business and Management, Institut Teknologi Bandung (ITB), Jalan Ganesha 10, Bandung 40132, Indonesia ' School of Business and Management, Institut Teknologi Bandung (ITB), Jalan Ganesha 10, Bandung 40132, Indonesia

Abstract: This paper provides the empirical evidence of the capital structure determinants and the speed of adjustment to reach the target in Indonesian state-owned enterprises (SOEs) during the period between 1995 and 2013. Using static and dynamic model with Generalised Least Squares estimation multiple regression technique, the result shows that Indonesian SOEs have their own capital structure determinants. The SOEs have a target capital structure following trade-off theory. The speed of adjustment towards capital structure target is 45.65% annually, which means that SOEs close two-third of the gap to their capital structure target within two years.

Keywords: static capital structure; dynamic capital structure; speed of adjustment; SOEs; state-owned enterprises; Indonesia; static modelling; dynamic modelling; generalised least squares; GLS; trade-off theory.

DOI: 10.1504/IJMEF.2016.080081

International Journal of Monetary Economics and Finance, 2016 Vol.9 No.4, pp.388 - 400

Available online: 24 Oct 2016 *

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