Moral Hazard and Debt Financing: The Role of Block holders in Leverage and Buyback Decisions in Indonesian Firms

Purpose: This study investigates the impact of moral hazard and block holder ownership structure on debt financing choices of corporations undertaking share buybacks on the Indonesia Stock Exchange by emphasizing internal monitoring procedures to reduce agency risks.Design/Methodology/Approach: The study used pooled data of non‑financial listed enterprises (2021–2025) with a final sample of 104 firms (117 observations). Linear and logistic regression techniques are used to measure regular and extraordinary funding.Findings: Moral hazard positively affects the intensity of debt financing and raises the chance of big debt transactions. In contrast, ownership concentration has a negative effect, showing that block holders play a role of alternative monitoring mechanism for debt control. The effect of block holder contestability is moderately unfavorable whereas coalitions are insignificant.Implications/Originality/Value: This is one of the few studies to examine the leveraged buyback literature in emerging economies. It demonstrates that moral hazard is the motivation for aggressive debt policy and that concentrated ownership is an effective constraint to aggressive debt policy. The results give empirical support for regulators to formulate leverage buyback restrictions and moral hazard monitoring frameworks, and offer actionable advice for independent commissioners and blockholders to oversee capital structure decisions.