Analysis Of Factors That Influence The Funding Decision Of The Tbk Manufacturing Company
Analysis of Factors Affecting Tbk Manufacturing Company Funding Decisions: Examining the Structure of Assets, Profitability, and Ownership Structure
Introduction
The funding decision of a company is a crucial aspect of its financial strategy, as it determines the availability of resources for future growth and development. In the context of manufacturing companies listed on the Jakarta Stock Exchange (BEJ), the funding decision is influenced by various factors, including asset structure, profitability, and ownership structure. This study aims to investigate the key factors that influence funding decisions in Tbk manufacturing companies during the 1999-2003 period.
Background
The funding decision of a company is influenced by various theories, including balance theory and the theory of preference order (pecking order theory). Balance theory explains how companies choose funding sources, both internal and external, while the theory of preference order suggests that companies prefer to use internal funds before switching to external funding. The theory of Brigham and Houston also identifies 12 potential factors that influence funding decisions.
Methodology
This study uses multiple linear regression methods to analyze secondary data from the Indonesian Capital Market Directory. The research sample consists of 43 manufacturing companies listed on the JSX. The study investigates the influence of asset structure, profitability, and ownership structure on long-term debt funding decisions, total debt, and equity in Tbk manufacturing companies.
Results
The results of the study showed that the asset structure, profitability, and ownership structure simultaneously had a significant influence on long-term debt funding decisions, total debt, and equity in Tbk manufacturing companies. Partially, asset structure and profitability are proven to influence long-term debt funding decisions. Meanwhile, profitability is a significant variable in determining the total funding decision of debt and equity.
Discussion
The finding of this study shows that the asset structure, which reflects the composition of company assets, plays an important role in determining the source of long-term funding. Profitability, as a measure of the company's ability to produce profits, is also a crucial factor in funding decisions, both for long-term debt and total debt and equity. It is also important to note that most manufacturing companies in the sample of this study tend to prioritize funding from equity, followed by short-term debt and long-term debt. This shows the tendency of manufacturing companies to maximize the use of internal funds before switching to external funding.
Conclusion
In conclusion, this study confirmed that the structure of assets, profitability, and ownership structure are important factors that influence the decision of the funding of Tbk manufacturing companies. These findings provide insight for stakeholders, such as investors, managers, and regulators, in understanding the dynamics of funding decisions and manufacturing company financial strategies.
Limitations and Future Research Directions
This study can be expanded by considering additional factors that are not covered in this study, such as risks, company size, and market conditions. Future research can also investigate the influence of other factors on funding decisions, such as the company's industry, market share, and competitive advantage.
Implications for Practice
The findings of this study have implications for practice, particularly for stakeholders involved in funding decisions, such as investors, managers, and regulators. Understanding the factors that influence funding decisions can help stakeholders make informed decisions and develop effective financial strategies.
References
- Brigham, E. F., & Houston, J. F. (2001). Fundamentals of financial management. Thomson South-Western.
- Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
- Ross, S. A., Westerfield, R. W., & Jaffe, J. F. (2002). Corporate finance. McGraw-Hill.
Table of Contents
- Introduction
- Background
- Methodology
- Results
- Discussion
- Conclusion
- Limitations and Future Research Directions
- Implications for Practice
- References
Keywords
- Funding decision
- Asset structure
- Profitability
- Ownership structure
- Tbk manufacturing company
- Jakarta Stock Exchange (BEJ)
- Balance theory
- Theory of preference order (pecking order theory)
- Multiple linear regression
- Indonesian Capital Market Directory
Frequently Asked Questions (FAQs) about the Analysis of Factors Affecting Tbk Manufacturing Company Funding Decisions
Q: What is the main objective of this study?
A: The main objective of this study is to investigate the key factors that influence funding decisions in Tbk manufacturing companies listed on the Jakarta Stock Exchange (BEJ) during the 1999-2003 period.
Q: What are the three main variables investigated in this study?
A: The three main variables investigated in this study are asset structure, profitability, and ownership structure.
Q: What is the significance of asset structure in funding decisions?
A: Asset structure plays an important role in determining the source of long-term funding. Companies with a high proportion of fixed assets may prefer to use long-term debt to finance their operations, while companies with a high proportion of liquid assets may prefer to use short-term debt or equity.
Q: What is the significance of profitability in funding decisions?
A: Profitability is a crucial factor in funding decisions, as it reflects a company's ability to generate profits and repay debt. Companies with high profitability may prefer to use equity to finance their operations, while companies with low profitability may prefer to use debt.
Q: What is the significance of ownership structure in funding decisions?
A: Ownership structure can influence a company's funding decisions, as it can affect the level of control and influence that shareholders have over the company's operations. Companies with a high level of institutional ownership may prefer to use debt to finance their operations, while companies with a high level of individual ownership may prefer to use equity.
Q: What are the implications of this study for stakeholders?
A: The findings of this study have implications for stakeholders, such as investors, managers, and regulators, in understanding the dynamics of funding decisions and manufacturing company financial strategies.
Q: What are the limitations of this study?
A: This study has several limitations, including the use of secondary data, the focus on a specific time period, and the exclusion of other factors that may influence funding decisions.
Q: What are the future research directions for this study?
A: Future research can investigate the influence of other factors on funding decisions, such as the company's industry, market share, and competitive advantage. Additionally, future research can explore the impact of funding decisions on company performance and financial stability.
Q: What are the practical implications of this study for companies?
A: The findings of this study can help companies make informed decisions about their funding strategies, including the use of debt and equity, and the level of control and influence that shareholders have over the company's operations.
Q: What are the implications of this study for regulators?
A: The findings of this study can help regulators understand the dynamics of funding decisions and manufacturing company financial strategies, and inform policy decisions related to company financing and regulation.
Q: What are the implications of this study for investors?
A: The findings of this study can help investors understand the factors that influence funding decisions and company financial strategies, and inform investment decisions related to manufacturing companies.
Q: What are the implications of this study for managers?
A: The findings of this study can help managers understand the factors that influence funding decisions and company financial strategies, and inform decisions related to company financing and operations.
Q: What are the implications of this study for researchers?
A: The findings of this study can contribute to the existing literature on company financing and funding decisions, and inform future research in this area.
Q: What are the implications of this study for the broader economy?
A: The findings of this study can help policymakers and regulators understand the dynamics of funding decisions and manufacturing company financial strategies, and inform policy decisions related to company financing and regulation.