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Decoding Capital Structure: The Role of Asset Composition, Growth Potential, and Profitability in IDXQ30 Firms (2021-2023)

In: Proceedings of the 2nd International Conference on Business, Accounting, Banking, and Economics (ICBABE 2025)

Author

Listed:
  • Handi Handi

    (Universitas BPD, Faculty of Economics and Business)

  • Ali Mursid

    (Universitas BPD, Faculty of Economics and Business)

Abstract

This study seeks to probe the influence of asset structure, growth opportunities, and profitability on the capital structure of firms listed in the IDXQ30 index from 2021 to 2023. Adopting a descriptive quantitative approach with multiple linear regression analysis (MLR) via SPSS version 27, the results unveil that asset structure exerts a significant influence on capital structure. Companies possessing a greater proportion of fixed assets tend to curtail their reliance on debt financing, in consonance with the Pecking Order Theory, which champions the preference for internal funding over external sources. Conversely, growth opportunities fail to exhibit a discernible impact on capital structure decisions, which are more substantially shaped by internal dynamics such as financial stability and risk appetite. Profitability, however, wields a pronounced effect on capital structure, with more profitable entities gravitating towards internal equity financing rather than external debt. These revelations provide invaluable strategic insights for financial decision-makers, facilitating the design of a more resilient and adaptable capital structure, while advancing the discourse on financial theory within the context of emerging markets, particularly in Indonesia.

Suggested Citation

  • Handi Handi & Ali Mursid, 2025. "Decoding Capital Structure: The Role of Asset Composition, Growth Potential, and Profitability in IDXQ30 Firms (2021-2023)," Advances in Economics, Business and Management Research, in: Ali Mursid & Fitri Lukiastuti (ed.), Proceedings of the 2nd International Conference on Business, Accounting, Banking, and Economics (ICBABE 2025), pages 191-197, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-862-2_15
    DOI: 10.2991/978-94-6463-862-2_15
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