The Effect of Profitability, Asset Tangibility, Corporate Tax, Non-debt Tax Shield and Inflation upon the Financial Capital Structure of the Manufacturing Companies listed on the Indonesian Stock Exchange

Abstract

This study seeks to obtain empirical evidence about the effects of profitability, asset tangibility, corporate tax, non-debt tax shield, and rate of inflation upon the financial capital structure of the Manufacturing Companies listed on the Indonesia Stock Exchange. The research hypothesis is that return on assets, tangible assets, corporate tax, non-debt tax shield, and rate of inflationmay have significant influence, whether as a group or individually, upon a company's financial capital structure. The population for this study are the manufacturing companies in the consumption goods sector that are listed on the Indonesia Stock Exchange from 2014 to 2016. 36 of these Manufacturing Companies make up the research sample. The methods of statistical data analysis we used in this study are descriptive statistics and tests of classical assumption as well as multiple linear regression. The results of data processing for individual variables show that profitability and Non-debt tax shield have a negative influence upon the Financial Capital Structure whereas and Tangible Assets have a positive influence upon the Financial Capital Structure. Meanwhile, neither Corporate Tax nor Inflation Rate has any significant influence upon the Financial Capital Structure of the Manufacturing Companies listed on the Indonesia Stock Exchange. At the same time, it can be shown that that profitability, Asset Tangibility, Corporate Tax, Non-Debt Tax Shield, and rate of inflation together have a significant influence upon the Financial Capital Structure of the Manufacturing Companies Listed on the Indonesia Stock Exchange. Type of paper: Empirical

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