Company Life Cycle and Capital Structure of Manufacturing Sector in the Consumer Goods Industry

• Main Authors: SULAEMAN R. NIDAR, RIZKI A. P. UTOMO
• Format: Article
• Language: English
• Published: Universitas Padjadjaran 2017-03-01
• Series: Jurnal Bisnis dan Manajemen
• Subjects: Leverage; Consumer Goods; Company Life Cycle; Proftability; Liquidity; Company Size; Non-Debt Tax Shield; Asset Tangibility; Growth Opportunites
• Online Access: http://journal.feb.unpad.ac.id/index.php/jbm/article/view/43

Determinaton of the optmal capital structure needs to be done by each company. Capital structure is the balance or rato between foreign capital and equity capital. One proxy of capital structure is leverage. The well-known theory in determining the leverage or capital structure is the pecking order theory. This theory explains that the company will use the funds to have a safer risk in advance in the determinaton of corporate leverage. There are many variables that affect the determinaton of a company’s leverage, so there is no single and standard model in determining the leverage or capital structure of the company. One variable that adds the explanaton of the determinaton of a company’s leverage is the life cycle as proposed by Dickinson (2011). The difference of company life cycle is differentated by the company’s cash flow including cash flow from operatng, fnancing, and investment. This study aims to determine whether the company life cycle can explain the determinaton of leverage or capital structure of the company, and fnd out the influence of other variables such as proftability, liquidity, size of frm, non-debt tax shield, asset tangibility, and growth opportunites on the leverage or capital structure of the company. This study was conducted in the consumer goods companies in 2012 and 2013. This study uses regression with dummy variables. The results showed that in 2012 and 2013, the variable of the life cycle can be one of the variables that can explain leverage the company’s decision. The variables that affect the leverage are proftability, liquidity, non-debt tax shield, asset tangibility, and growth opportunites. The variable which has no effect on leverage is the size of the company.