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Institutional Change and Corporate Financing in Indonesia: Estimating the Effects of Social and Political Factors on Capital Structure

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  • Hidenobu Okuda
  • Yasushi Take

Abstract

This study investigates the factors determining the capital structure of Indonesian listed companies before and after the implementation of economic reform policies subsequent to the 1997-1998 Asian financial crisis. The estimation analysis of the panel data for the period 1994-1997 and 2000-2006 reveals several factors that determined substantive change in the financing activities of these listed companies. The capital structure of Indonesian companies had not been explained sufficiently by the standardized theory of corporate financing, which had not considered the effects of the specific social and political elements as well as business conglomerates, before the Asian financial crisis. However, the capital structure of Indonesian companies became fitted more to the corporate financing theory, after the influence of social and political factors of corporate attributes weakened substantially following the post-crisis reform policies. This significant change is considered to result from institutional change caused by the financial and corporate reforms in the post-financial crisis era.

Suggested Citation

  • Hidenobu Okuda & Yasushi Take, 2009. "Institutional Change and Corporate Financing in Indonesia: Estimating the Effects of Social and Political Factors on Capital Structure," Global COE Hi-Stat Discussion Paper Series gd09-108, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd09-108
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-108.pdf
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    References listed on IDEAS

    as
    1. Wiwattanakantang, Yupana, 1999. "An empirical study on the determinants of the capital structure of Thai firms," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 371-403, August.
    2. Laurence Booth, 2001. "Capital Structures in Developing Countries," Journal of Finance, American Finance Association, vol. 56(1), pages 87-130, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Corporate Finance; Capital Structure; Ethnic network; Indonesia;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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