How Maritime Connectivity and Crude Oil Price Determine Capital Structure of Maritime Industry in Indonesia

Maritime industries dominate the world’s trade transportation mode because more than 90% of international trade volume is transported by sea. Indonesia as the biggest maritime country in the world has a big contribution to international trade volume. Investment decisions are very important for the sustainability and competitiveness of the companies in this industry. This article showed that several variables such as oil crude price and maritime connectivity index have determined the capital structure of firms in the maritime industry in Indonesia. The research analyzed 23 listed companies in the maritime industry in Indonesia between 2016–2020 using the ordinary least square and fixed effect model. The results of this study are in accordance with the pecking order theory as well as the trade-off theory. It showed that financial leverage was negatively affected by return on asset, and positively affected by tangibility and operating cash flow. In addition, oil crude price and maritime connectivity index have strengthened and weakened the correlations between financial leverage and its independent variable such as the return of assets, tangibility, and operating cash flow. These findings could help managers of the company to make a decision about their optimal capital structure based on those variables. This study has focused on the macroeconomic factors that affect firms’ capital structure such as crude oil prices and maritime connectivity. Companies in the maritime industry in Indonesia have to be more focused on the tangibility and profitability of the company to make an investment decision. Furthermore, the results showed that fluctuation of crude oil prices and maritime connectivity index also become factors to be considered to optimize the capital structure of the companies.