The Heterogeneity of Speed of Adjustment Capital Structure Across Industrial Sectors

Abstract

This study aims to analyze heterogeneity of speed of adjustment on basic industry, consumer goods, and misceleeneous companies. The population in this study uses basic industry, consumer goods, and miscellenoeus companies listed on the Indonesia Stock Exchange in 2009-2018 period. The method of determining the sample using a pusposive sampling technique based on criteries determined by researchers. We employ two-step partial adjustment model and use measure of book leverage and firm characteristic; profitability, size, tangibility, and growth which has an influence leverage target to estimate speed of adjustment. For three industries, there is evidence of heterogeneity of speef adjustment. The result showed that speed of adjustment 24% of basic industry, 37.1% of consumer goods, and 27.3% of miscellaneous industry.

Capital Structure Adjustment Speed in Indonesia Health Sector Companies

“…The speed of adjustment is the time it takes the company to adjust its capital structure towards the optimal capital structure (Robiatun & Witiastuti, 2021). The concept of speed of adjustment begins with a dynamic trade off that is made to make the company achieve the optimal leverage target based on calculating the benefits of tax savings with debt and bankruptcy costs (Supra et al 2016).…”