Determinants of Capital Structure and Its Impact on Firm Value on
Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
Diana Dwi Astuti, Isti Fadah, Hari Sukarno, Nurhayati
Faculty of Economic and Business, University of Jember, Jember, Indonesia
Keywords: Capital Structure, Firm Value, Macro Variabel, Micro Variable.
Abstract: Aims of this study are to analyze the direct effect of macro variables on capital structure and firm value; to
analyze the effect of capital structure on firm value, and to analyze the indirect effect of macro and micro
variable to firm value through the capital structure as intervening variable. The analysis method is path
analysis. Samples are 34 and 39 manufacturing companies in IDX and SET in 2010-2015. Novelty: Makro
and mikro variable, Capital Expenditure, Cost of Financial Distress, and path analyst. The result shows that
macro variable has no significant effect to capital structure and firm value in IDX and SET, ROA has a
significant negative effect to capital structure and have a significant positive effect to firm value. CAPEX
has the significant effect on the capital structure and firm value, Non-Debt Tax Shield only have the
significant effect on firm value in IDX. NDTS significant effect on capital structure while capital
expenditure and asset structure have an effect on Significant to firm value in SET; Capital structure has
significantly influences the value of firms in IDX and SET; Inflation, ROA, NDTS, asset structure, CFD has
significant influence to firm value through capital structure in IDX, in SET that has significant influence to
firm value through capital structure is the exchange rate, NDTS and CFD.
1 INTRODUCTION
In 2015 Indonesia and other Asian countries face
challenges in the economic sector due to the
normalization of China's economic growth,
continued slowdowns in the Japanese economy,
falling commodity prices, and the possibility of
rising US Federal Reserve's benchmark interest rate.
The impact of this recession on Asian countries is
the interest rate increase the local currency exchange
rate against the value of the dollar weakened, so that
also affects the price (value) shares weakened.
Following the development of economic growth in
Southeast Asian countries (Indonesia, Malaysia,
Singapore, Thailand, and Philippines) for 5 years
(2010-2014).
Table 1: Economic growth of ASEAN countries
(Percent/year).
ASEAN
Country
2010 2011 2012 2013 2014
Indonesia
Malaysia
Filipina
Singapura
Thailand
6,23
7,55
7,68
15,40
7,90
6,50
5,20
3,70
5,30
0,20
6,25
5,63
6,80
2,50
6,75
5,78
4,70
7,23
3,85
2,90
5,00
6,00
6,05
2,90
0,65
average 8,95 4,18 5,59 3,54 4,12
From the Table 1, we can see that Indonesia's
economic growth continues to decline and Thailand
tends to experience a very fluctuating decline.
Astuti, D., Fadah, I., Sukarno, H. and Nurhayati, .
Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and Thailand Stock Exchange (SET).
In Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study (JCAE 2018) - Contemporary Accounting Studies in
Indonesia, pages 43-53
ISBN: 978-989-758-339-1
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
43

Following the inflation rate of Southeast Asian
countries for 5 years.
Table 2 Inflation rate of ASEAN countries
(Percent/year).
ASEAN
Country
2010 2011 2012 2013 2014
Indonesia
Malaysia
Filipina
Singapura
Thailand
5,33
1,73
3,73
3,13
3,23
5,13
3,23
4,75
5,30
3,68
3,93
1,55
3,05
4,88
3,28
6,60
2,30
3,18
2,10
2,03
6,73
3,03
3,85
0,93
1,73
average 3,43 4,42 3,4 3,24 3,25
From the data above that Indonesia's inflation
rate tends to increase and Thailand has decreased.
With the instability of economic growth and
inflation rate, it will affect the condition of corporate
financial management that will affect the stock price
(firm value).
The goal of a go public company is to maximize
shareholder wealth. Increased shareholder wealth is
achieved by increasing the value of the company.
Jansen (2001) explains that maximizing the value of
a firm is a trade-off of a firm's value received over a
long period. The firm value will be reflected in the
stock price, where the stock price decreases then the
firm value will also decrease so that will affect the
decrease prosperity shareholders.
Factors affecting firm value are macro and micro
factors. Macro factors are seen in economic factors
such as inflation, interest rates, exchange rates,
economic growth. Micro factors derived from
financial management policies, including investment
policy, funding policy, and dividend policy. Funding
policy is a very important factor in determining the
firm value because the funding policy is used for
corporate activation activities for the company to run
continuously in the future. The funding policy is
concerned with determining the right capital
structure for the company, the funding decision is
how the company determines the optimal funding
source to fund various investment alternatives, so as
to maximize the firm value reflected in the stock
price. The debt usage policy in the capital structure
provides a signal or sign to investors that with the
company's funding policy affecting firm value
(Masdar Mas'ud, 2008: 59). High firm values lead to
increased investment and increased capital structure.
The optimal capital structure according to Napa I.
Awat and Muljadi (2006: 34) is a capital structure
that can maximize the market value of the company
by minimizing the average cost of capital. Therefore,
in order for these conditions to be achieved, it is
necessary to consider the variables affecting the
capital structure.
The funding decision is related to determining
the right capital structure for the company, the
funding decision is how the company determines the
optimal funding source to fund various investment
alternatives, so as to maximize the value of the
company reflected in the stock price. The debt usage
policy in the capital structure provides a signal or
sign to investors that with the company's funding
policy affecting firm value (Masdar Mas'ud, 2008:
59). High firm values lead to increased investment
and increased capital structure. The optimal capital
structure according to Napa I. Awat and Muljadi
(2006: 34) is a capital structure that can maximize
the market value of the company by minimizing the
average cost of capital. Therefore, in order for these
conditions to be achieved, it is necessary to consider
the variables affecting the capital structure.
The determinants of capital structure (DAR) and
firm value (PBV) in this study are: Micro variable
(inflation, interest rate, exchange rate, gross
domestic product (GDP)) and micro variable
(Profitability / ROA, Non Debt Tax Shield / NDTS,
Capital Expenditure / Capex, asset structure, Cost of
Financial Distress / CFD).
The theory of conventional capital structure
(Mayers, 1997; Jensen 1986) states that the firm's
optimal capital structure is related to the costs and
benefits associated with debt and equity financing.
The trade-off Theory, states that a company subject
to taxes should increase its debt level to the marginal
value of the tax limit from the cost of any possible
financial difficulties. The tradeoff theory in capital
structure theoretically balances the tax advantages of
borrowing to cover the costs of financial difficulties.
Another study by Mayers and Majluf, 2001, in
Packing Order Theory (POT) is based on
asymmetric information problems. Myers and
Majluf predict that firms prefer internal financing to
finance investments and if they use external funding
it will use debt in advance of equities.
Profitability is a variable affecting the capital
structure. In this research, profitability is represented
by Return On Assets (ROA), that is by comparing
net income with total assets of company. According
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
44

to Weston and Brigham (2001:713), firms with high
ROA, generally use relatively small amounts of
debt. This is due to the high return on assets,
allowing the company to capitalize with retained
earnings only. This research has been done by
Deesomsak, et al (2004), Delcoure (2006) and
Huang & Song (2006) which resulted that
profitability negatively affect the capital structure.
However, not only that, another assumption says that
high return on assets means that the company's net
profit is high, so if the company uses large debt it
will not affect the capital structure, because the
company's ability to pay interest is also high. High
returns make it possible to finance most of the
funding needs with internally generated funds. It has
also been conducted empirical research by Titman
(1988), Moh'd (1998), Ekstrom and Kanaporyte
(2015), and Hossain (2015) which shows that
profitability has a positive effect on the company's
capital structure.
The theory proposed by Weston and Copeland
(1999: 35) sales growth is a variable affecting the
capital structure. Brigham and Houston (2004: 39)
also say that firms with relatively stable sales can be
safer to get more loans and bear a higher fixed
burden than companies with unstable sales.
Empirical research by Krishnan (1996), Badhuri
(2002), Mohamad (1998), and Majumdar (1999)
indicate that the growth of sales (growth of sales) is
one variable that affect the capital structure of the
company. The higher the asset structure the higher
the capital structure means the greater the fixed
assets that can be used as debt collateral by the
company. Conversely, the lower the asset structure
of a company, the lower the ability of the company
to be able to guarantee its long-term debt. This is in
accordance with the theory of Weston and Brigham
(2001: 713), that firms that have assets as debt
collateral tend to use larger amounts of debt. Assets
referred to as collateral for debt are fixed assets.
Financial Distress is a condition where
companies are experiencing financial difficulties and
are threatened with bankruptcy. If the company goes
bankrupt, there will be bankruptcy costs incurred by:
the forced selling of assets below market prices, the
cost of corporate liquidation, the destruction of fixed
assets eaten before selling, etc. These costs include
Direct Cost of Financial Distress. In general, the
likelihood of occurring financial distress increases
with the increasing use of debt. Cost of Financial
Distress is the variability of earnings and can be a
measure of a company's business risk, then the
prospective creditor tends to lend to companies that
have relatively stable earnings. The higher the
company's earning variability, the lower the
company's debt utilization. Research Chen (2004)
found a not significant relationship between
financial distress and laverage.
Tax Shields Effects by using Non-Debt Tax
Shield (NDTS) is the amount of non-cash costs that
lead to tax savings and can be used as capital to
reduce debt. The tax savings can come from
depreciation and amortization. Depreciation and
Amortization are non-cash expenses, so the greater
the depreciation and amortization the greater the
income tax savings. Thus the tax rate and debt to
equity ratio are hypothesized to have a positive
relationship, this is in line with Trade Off Theory.
Research conducted by Chen (2004) and Akhtar
(2005) shows a non-significant relationship between
Non-Debt Tax Shield and laverage.
Capital Expenditure (CAPEX) is a cost or fund
intended to benefit future periods and is reported as
an asset (Carter and Usry, 2002: 539). Assets here
are assets that have long-term benefits. According to
the Financial Accounting Standards (SAK) of 2015
states that fixed assets are tangible assets acquired in
ready-to-use or pre-built form, used in company
operations, not intended for sale in the framework of
the normal activities of the enterprise and have a
benefit of more than one year . Jansen (1989) in his
research argues that the more cash available the
more investors will invest.
Not much research on the influence of capital
expenditure and cost of financial distress on capital
structure and firm value. There is no consistency
from previous researchers about inflation variables,
interest rates, exchange rates, GDP, profitability,
firm size, asset structure, and NDTS on the capital
structure and firm value. No research has been found
to compare the manufacturing firms listed on the
Indonesia Stock Exchange (IDX) and the Thai Stock
Exchange (SET) from external and internal factors
to the capital structure and firm value.
Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
45

2 RESEARCH METHODS
2.1 Conceptual Framework
Figure 1: Conceptual framework.
2.2 Hypothesis
Hypothesis in this research as follows:
2.2.1 Inflation Influence on Capital
Structure and Firm Value
Understanding Inflation according to some sources
are: Inflation is a price increase continuously (Joel G
Siegel, 1999: 253). According to Ibbotson and
Brinson (1993: 241) say inflation is a sustained
increase in the general price level over time.
Thuesen and Fabrycky (2001: 125) say that inflation
and deflation are conditions that describe changes in
price levels in an economy. Furthermore Yuswar
and Mulyadi (2003: 21) say inflation is a state of
monetary value declined openly due to price
increases of goods. Some definitions can be
concluded that inlasi is a state of decline in the value
of a country's currency and the rising prices of goods
that take place systematically. The definition can be
understood that inflation is a dangerous condition for
the economics of a country. The high inflation will
decrease people's purchasing power on goods and
services, so that the economy of a country will
deteriorate which will result in decreasing profit
level of the company and will result in the
movement of stock price becomes less competitive.
So that inflation will affect the capital structure and
firm value.
Influence Inflation on Capital Structure.
Research conducted by Aris and Giorgi (2014),
Riana (2014), Natalia Makhova (2014) states that
inflation has a significant influence on capital
structure. Hypothesis in this research are:
H1: Inflation has a significant influence on
capital structure.
Influence Inflation on Firm Value. Research
conducted by Eduardus (1997), Dewi (2001), Siti
(2004), (Bambang S (2010) that inflation has a
significant influence on the firm value because the
higher the inflation will be lower the firm value.
Hypothesis in this study are:
H2: Inflation has a significant influence on firm
value.
2.2.2 Influence of Interest Rate on Capital
Structure and Firm Value
The interest rate used is the interest rate of Bank
Indonesia. Interest rates are an important factor in
making investment decisions, as interest rates can be
used as a barometer of costs as well as income for
businesses. Increasing interest rates will cause prices
to rise so will affect the structure of capital and firm
value.
Influence of Interest Rate on Capital Structure.
Research conducted by Taoulaou and Giorgi
Burchuladze (2014), Natalia Mokhova (2014) states
that interest rates have a significant influence on
capital structure. Hypothesis in this research are:
H3: Interest rates have a significant influence on
the structure capital.
Influence of Interest Rate on Firm Value.
Research conducted by Suryanto (1998), Sudjono
(2002) states that interest rates have a significant
influence on the firm value. Hypothesis in this
research are:
H4: Interest rates have a significant influence on
firm value.
2.2.3 Effect of Exchange Rate on Capital
Structure and Firm Value
The exchange rate used is the Rupiah exchange rate
against the US Dollar. A strong exchange rate
indicates that the value of the rupiah appreciates or
rises against the dollar ($), and vice versa. The
exchange rate represents the foreign sector in
affecting the company's capital structure and firm
value. The higher the value of the rupiah against the
dollar (exchange rate) the higher the capital structure
the lower the firm value.
Effect of Exchange Rate on Capital Structure.
Research conducted by Ana Mufida (2012) states
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
46

that the exchange rate has a significant influence on
capital structure. Hypothesis in this research are:
H5: Exchange rate has an influence on capital
structure.
Effect of Exchange Rate on Firm Value.
Research conducted by Sudjono (2002), Siti (2004),
Robiatul and Ardi (2006), and Achmad ATH
Thobarry (2009) stated that the exchange rate has a
significant influence on firm value. Hypothesis in
this research are:
H6: Exchange rate has a significant influence on
firm value.
2.2.4 Influence of GDP on Capital Structure
and Firm Value
GDP (Gross Domestic Product) is a barometer of
economic growth. If economic growth increases /
high, then an indication that the prospect of
investment is good. Economic growth with firm
value will move in the same direction as increasing
economic growth will be caught as a signal of
increased investment activity so that the firm value
will increase.
Influence of GDP on Capital Structure. Research
conducted by Ana Mufida (2012) states that GDP
has a significant influence on capital structure
Hypothesis in this study are:
H7: GDP has a significant influence on capital
structure.
Influence of GDP on Firm Value. Research
conducted by Nieuwerburgh (2005) and Robiatul
and Ardi (2006) states that GDP has a significant
influence on firm value. Hypothesis in this research
are:
H8: GDP has a significant influence on firm
value.
2.2.5 Effect of ROA on Capital Structure
and Firm Value
Return On Assets (ROA), according to Weston and
Brigham (2001: 713) companies with high levels of
profitability (ROA), generally use a relatively small
amount of debt. This is due to high profitability
(ROA) is possible for companies to capitalize with
retained earnings only. The greater the retained
earnings the greater the need for funds being met
from within the enterprise, and reducing the use of
funds from debt, which will further reduce the
company's capital structure. Packing Order Theory,
states that the sequence of funding in the capital
structure is retained earnings, debt, and stocks
emissions. Based on Packing Order Theory,
profitability (ROA) has a negative effect on capital
structure. The more efficient the financing and the
maximum the investment the higher the profit
earned. The higher the profit the higher the stock
price, meaning profitability has a positive effect on
the firm value.
Effect of Profitabiltas on Capital Structure. The
results of research conducted by Mayangsari (2000),
Deesomsak, et al (2004), Kartini and Arianto (2007),
Naomech (2012), Md Faruk Hosain and Prof.
Dr.Md.Ayub Ali (2012) Alam (2013), Akinyomi
(2013), Safitri (2014), Pedro Proenca, at al (2014),
Anshu Handoo and Kapil Sharma (2014), and
Shirley Chen Ye Ekstrom and Indre Kanaporyte
(2015), stated that Profitability has a significant
influence on capital structure. Hypothesis in this
research are:
H9: ROA has a significant influence on capital
structure.
The Effect of Profitability on Firm Value. The
results of research conducted by Sari (2005), Sri
Hermuningsih (2013), and Safitri (2014), states that
profitability has a significant influence the firm
value. Hypothesis in this research are:
H10: ROA has a significant influence on firm
value.
2.2.6 Effect of Tax Shields on Capital
Structure and Firm Value
Tax Shields measured by Non-Debt Tax Shield
(NDTS) indicate the availability of internal funds
derived from tax savings on depreciation and
amortization. The higher the NDTS the lower the
debt, meaning the NDTS has a significant effect on
the capital structure. The higher the NDTS, the
greater the source of internal funds, mean NDTS has
a significant effect on the firm value.
The Effect of Tax Shields on Capital Structure.
The results of research conducted by Deesomsak
(2004), Akinyomi (2013), Anshu Handoo (2014),
DR.R.Kavitha (2014), Siti Salimah Hussain and
Hassan Miras (2015), and Shirley ChenYe Ekstroom
and indre Kanaporyte (2015) . states that NDTS has
a significant influence on capital structure.
Hypothesis in this research are:
H11:NDTS has a significant influence on capital
structure
The Effect of Tax Shields on Firm Value. The
results of research conducted by Deesomsak (2004),
Anshu Handoo (2014), states that NDTS has a
significant influence on firm value. Hypothesis in
this research are:
H12: NDTS has a significant influence on firm
value.
Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
47

2.2.7 Effect of Capital Expenditure on
Capital Structure and Firm Value
Jansen (1989) in his research argues that the more
cash available the more investors will invest
regardless of whether the investment is good or bad.
If the company's capital expenditure gets bigger then
the capital requirement of the company will also be
bigger to fulfill the requirement so that company
will seek fund from outside, so will increase
laverage company. So the higher the capital
expenditure will increase the debt of the company,
the capital expenditure has a positive influence on
capital structure and firm value.
The Influence of Capital Expenditure on Capital
Structure. The results of research conducted by
Boodhoo Roshan (2009), states that Capital
Expenditure has a significant influence on capital
structure. Hypothesis in this research are:
H13: Capital Expenditure has a significant
influence on capital structure
The Influence of Capital Expenditure on Firm
Value. The results of research conducted by Coles,
et al (2004), Desak and Ni Wayan (2007), Sarpi
(2009), Rahmiati and Widya Sari (2013), stated that
Capital Expenditure has a significant influence on
firm value. Hypothesis in this research are:
H14: Capital Expenditure has a significant
influence on firm value.
2.2.8 Effect of Asset Structure on Capital
Structure and Firm Value
Increased The asset structure means that the firm's
fixed assets will increase, resulting in working
capital and the ability of the company to meet its
maturing corporate liabilities to decrease so that the
company will need capital from the stock as a result
the firm value will decrease.
Influence of Asset Structure to Capital Structure.
Research conducted by Anastasia, Gunawan, and
Wijaya (2011), Mayangsari (2000), Naomech
(2012), Akinyomi and Olagunju (2013), Anshu
Handoo (2014), Pedro Proenca, et al (2014), Aris
Taoulaou and Giorgi Burchuladze (2014), Siti
Salimah Hussain and Hassan Miras (2015), and
Shirley ChenYe Ekstroom and the Kanaporyte indre
(2015). states that the Structure of Assets has a
significant influence on capital structure. Hypothesis
in this research are:
H15: The structure of the asset has a significant
influence on the structure capital
Effect of Asset Structure on Firm Value. Research
conducted by Anastasia, Gunawan, and Wijaya
(2011), states that the Asset Structure has a
significant influence on the firm value. Hypothesis
in this research are:
H16: Asset Structure has significant influence on
firm value.
2.2.9 Influence of Cost Financial distress on
Capital Structure and Firm Value
The earning variability can be a measure of a
company's business risk, so prospective creditors
tend to lend to companies that have relatively stable
earnings. Thus the higher the earning variability of a
company, the lower the debt utilization by the
company. So Cost Financial distress has a
significant influence on capital structure and firm
value.
Influence of Cost Financial distress on Capital
Structure. Research conducted by Ratnawati (2001),
Chen (2004), Teddy (2005) states that Cost
Financial distress has a significant influence on
capital structure. Hypothesis in this research are:
H17: Cost Financial distress has a significant
influence on capital structure.
The Influence of Cost Financial distress on Firm
Value. Research conducted by Chen (2004), states
that Cost Financial distress has a significant
influence on the firm value. Hypothesis in this
research are:
H18: Cost Financial distress has a significant
influence on the firm value.
2.2.10 Effect of Capital Structure on Firm
Value
The capital structure in influencing firm value is
reinforced by Modigliani-Miller (MM) theory
assuming there is a tax. This theory according to
Luke (2003: 259) states that "MM concludes the use
of debt (laverage) will increase the firm value
because the cost of debt interest is the cost that
reduces tax payments (a tax deductible expense).
Increase in the value of perisahaan occurs because of
the cost of debt interest that reduces tax payments,
so the operating profit becomes the investor's rights
will be greater. So an increase in debt along with an
increase in capital structure will increase the value
of the firm. This research is supported by Masdar
researchers (2008) and Rahmawati (2013). So that
can be formulated hypothesis as follows:
H19: The capital structure has a significant
influence on the firm value.
Sample selection using proposive sampling with
criteria active company (providing financial
statements) in trading on stock exchanges in
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
48

Indonesia and Thailand during 2011-2015;
Manufacturing companies do not perform Stock
Splite during 2011-2015 on the Indonesia Stock
Exchange (IDX) and Stock Exchange Thailand
(SET).
Test the hypothesis using path analysis, the
equation:
Z = 〉
zx1
X
1
+ 〉
zx2
X
2
+ 〉
zx3
X
3
+ 〉
zx4
X
4
+ 〉
zx5
X
5
+ 〉
zx6
X
6
+ 〉
zx7
X
7
+〉
zx8
X
8
+ 〉
zx9
X
9
+ ε
1 (1)
Y = 〉
yx1
X
1
+〉
yx2
X
2
+ 〉
yx3
X
3
+ 〉
yx4
X
4
+ 〉
yx5
X
5
+ 〉
yx6
X
6
+ 〉
yx7
X
7
+ 〉
yx8
X
8
+ 〉
yx9
X
9
+ 〉
yz
Z + ε
2 (2)
Caption:
Z = Capital structure, Y = Firm Value
X
1
= inflation, X
2
= rate of interest
X
3
= exchange rate, X
4
= PDB
X
5
= ROA, X
6
= NDTS
X
7
= CAPEX, X
8
= Asset structure
X
9
= Cost of Financial Distress
ε
1,,2
= errors
2.3 Operational Definition
The capital structure measured by Total Debt to
Total Assets, is how much of the total assets are
provided to guarantee the corporate debt. The
measurement scale uses the ratio. The value of the
firm is measured by Price to Book Value (PBV).
PBV is the ratio of market price per share at a
closing price to book value per share. The
measurement scale uses the ratio.
Inflation, is the relative real value of changes in
the prices of goods on the market. Inflation was
measured by the inflation rate in each country during
the study period. The measurement scale uses the
ratio. The interest rate, the real interest rate or the
risk-free interest rate is the policy interest rate of the
central bank. Measurement scale using ratio. The
exchange rate is the real conversion value of money
(Rupiah and Bath) against US Dollar. This study
uses the exchange rate measured by the real spot
exchange rate of Indonesian Rupiah (IDR) and Bath
(THB) against US dollar. The measurement scale
uses the ratio.
Gross Domestic Product, Economic growth is a
change in the value of real Gross Domestic Product
(GDP). Economic growth is measured by changes in
real GDP over at constant prices. The measurement
scale uses the ratio. Profitability is measured by
Return on Assets (ROA), i.e. the company's ability
to profit from the assets that have been invested in
the company's business for one year. The
measurement scale uses the ratio.
No Debt Tax Shields is the availability of
internal funds derived from tax savings on
depreciation and amortization. The scale of
measurement uses the ratio. Capital Expenditure is
the capital spent on financing the company's assets
for corporate investment purposes. The
measurement scale uses the ratio.
Asset Structure is how much-fixed assets
dominate the composition of company-owned
company's wealth. The measurement scale uses the
ratio. Cost of Financial Distress is the risk that will
be faced by the company due to variable profit
before tax of the company to earnings before interest
and tax with profit before tax. Scale measurement
using the ratio.
3 THEORIES
3.1 Agency Cost
Agency Cost is a cost incurred because the company
uses debt and involves a relationship between the
owner of the company and the creditor. If a
company uses debt, it is possible that the company
owner is doing harmful actions, such as investing in
high-risk projects. The cost of bankruptcy there is
two that is directly and indirectly. Direct costs are
cash issued in relation to bankruptcy administration
and proceedings. Indirect costs are costs associated
with the bankruptcy process but not in the form of
cash disbursements.
3.2 Trade-Off Model
Consider financial distress and agency Cost into the
MM model with taxes. The use of debt will increase
the firm value but only to a certain point. After that
point, the use of debt will actually lower the value of
the company because the increase in profit from the
use of debt is not comparable with the increase in
the cost of financial distress and agency Cost.
3.3 Asymmetric Information Theory
Asymmetric information is a condition in which a
party has more information than the other
(Donaldson, 1950). Asymmetric information,
company management knows more about the
company than investors in the capital market.
Gardon Donaldson concludes that the company
prefers to use funds in order of retained earnings,
Debt, and Sale of new stocks.
Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
49

3.4 Pecking Order Theory
Pecking order theory is a mechanism for selection of
funding sources related to the transaction cost issue
of new external funding sources. This theory plays
an important role in the capital structure of the
company. The company's capital structure policy in
the determination of funds is related to the
determination of the best balance in terms of internal
and external funding sources. Meeting the needs of
internal sources relates to performance and financial
ratios while the fulfilment of external sources is
related to inflation, exchange rate, interest rate,
economic growth and asymmetric information.
3.5 Firm Value
Firm value describes how management manages
corporate wealth that can be seen from the
measurement of financial performance. According to
Mariano (2012: 40), the value of stock price is the
most commonly used as an indicator in assessing the
firm value, because the value of the stock price is
considered to represent the performance of the
company. The increase in firm value is marked by
an increase in stock prices in the market. The high of
the firm value will be followed by an increase in
shareholder value.
4 RESULTS
Using purposive sampling, sample manufacturing
firms at IDX is 34 of 143companies, and at SET
there are 39 of 127 companies. The result of
linearity test, all variables show linear correlation.
There is multicollinousas exchange rate and GDP in
IDX, inflation and interest rate in SET, so that
variable is eliminated from the model.
4.1 Hypothesis Testing Manufacturing
Companies in IDX
Table 3: Test Results Hypothesis Model Direct Influence
on Manufacturing Companies in IDX.
Relevancy between
variables
Path
Coefficient
ρ-value Evidence
Inflation
(X1)
Capital
Structure
(Z)
-0,032 0,805
No
Significant
Interest
rate(X2)
Capital
Structure
(Z)
0,050 0,700
No
Significant
ROA
(X3)
Capital
Structure
-0,301 0,034**
Significant
(Z)
Tax
Shield
(X4)
Capital
Structure
(Z)
-0,078 0,347
No
Significant
CAPEX
(X5)
Capital
Structure
(Z)
0,234 0,006**
*
Significant
Asset
Structure
(X6)
Capital
Structure
(Z)
0,023 0,793
No
Significant
Cost of
Financial
Distress
(X7)
Capital
Structure
(Z)
0,080 0,317
No
Significant
Capital
Structure
(Z)
Firm
Value(Y)
-0,127 0,015**
Significant
Inflation
(X1)
Firm
Value(Y)
-0,014 0,868
No
Significant
Interest
rate(X2)
Firm
Value(Y)
0,130 0,130
No
Significant
ROA
(X3)
Firm
Value(Y)
0,678 0,000**
*
Significant
Tax
Shield
(X4)
Firm
Value(Y)
-0,226 0,000**
*
Significant
CAPEX
(X5)
Firm
Value(Y)
0,126 0,029**
Significant
Asset
Structure
(X6)
Firm
Value(Y)
-0,026 0,658
No
Significant
Cost of
Financial
Distress
(X7)
Firm
Value(Y)
-0,037 0,481
No
Significant
Table 4: Indirect Effect of Manufacturing Companies at
IDX.
Variable Direct Indirect Total Conclusion
Inflation
(X1)
-0,014 0,00406 -0,00994 Capital
Structure as
variable
intervening
Interest
rate(X2
0,130 -
0,00635
0,12365 Capital
Structure not
as variable
intervening
ROA (X3) 0,678 0,03823 0,71623 Capital
Structure not
as variable
intervening
Tax
shields
(X4)
-0,226 0,00991 -0,21609 Capital
Structure as
variable
intervening
CAPEX
(X5)
0,126 -0,02972 0,09628 Capital
Structure not
as variable
intervening
Asset
Structure
(X6)
-0,026 -0,00292 -0,02892 Capital
Structure as
variable
intervening
Cost of
Financial
-0,037 -0,01016 -0,04716 Capital
St
r
ucture as
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
50

Distress
(X7)
variable
intervening
The result of the determination R
2
M
is 71%,
meaning that the diversity of the data can be
explained by the model described and the sizes of
29% explained by other variables outside the study.
4.2 Hypothesis Testing Manufacturing
Companies in SET
Table 5: Test Results Hypothesis Model Direct Effect on
Manufacturing Companies in SET.
Relevancy
between variables
Path
Coeff.
ρ-value Evidence
Exchange
rate
(X1)
Capital
Structure
(Z)
0,102 0,123 No
Significa
n
t
PDB (X2) Capital
Structure
(Z)
0,104 0,116 No
Significa
n
t
ROA (X3) Capital
Structure
(Z)
-0,515 0,000*** Significa
nt
Tax
Shield
(X4)
Capital
Structure
(Z)
0,122 0,090* Significa
nt
CAPEX
(X5)
Capital
Structure
(Z)
0,062 0,408 No
Significa
n
t
Asset
Structure
(X6)
Capital
Structure
(Z)
0,051 0,550 No
Significa
n
t
Cost of
Financial
Distress
(X7)
Capital
Structure
(Z)
-0,052 0,424 No
Significa
nt
Capital
Structure
(Z)
Firm
Value
(Y)
-0,404 0,050** Significa
nt
Exchange
rate (X1)
Firm
Value
(Y)
-0,070 0,374 No
Significa
n
t
PDB (X2) Firm
Value
(Y)
0,008 0,921 No
Significa
n
t
ROA (X3) Firm
Value
(Y)
0,268 0,003*** Significa
nt
Tax
Shield
(X4)
Firm
Value
(Y)
-0,071 0,408 No
Significa
n
t
CAPEX
(X5)
Firm
Value
(Y)
0,903 0,007*** Significa
nt
Asset
Structure
(X6)
Firm
Value
(Y)
0,248 0,016** Significa
nt
Cost of
Financial
Distress
(X7)
Firm
Value
(Y)
-0,041 0,599 No
Significa
nt
Table 6: Testing Indirect Effect on Manufacturing
Companies in SET.
Variable Direct Indirect Total Conclusion
Exchange
rate (X1)
-0,070 -0,04121 -0,11121 Capital
Structure as
variable
inte
r
venin
g
PDB (X2) 0,008 -0,04202 -0,03402 Capital
Structure
not as
variable
intervenin
g
ROA (X3) 0,268 0,20806 0,47606 Capital
Structure
not as
variable
intervenin
g
Tax
shields
(X4)
-0,071 -0,04929 -0,12029 Capital
Structure as
variable
intervenin
g
CAPEX
(X5)
0,903 -0,02505 0,87795 Capital
Structure
not as
variable
intervenin
g
Asset
Structure
(X6)
0,248 -0,02060 0,22740 Capital
Structure
not as
variable
intervenin
g
Cost of
Financial
Distress
(
X7
)
-0,041 0,02101 -0,01999 Capital
Structure as
variable
intervenin
g
The result of coefficient of determination: R2M
equal to 67%, meaning that the diversity of the data
can be explained by the model described, while the
rest of 33% is explained by other variables outside
the research.
5 DISCUSSION
Inflation has no effect on the capital structure and
firm value in IDX. This is because the company
believes that the government will continue to control
the country's inflation, so inflation does not affect
the debt and stock price of the company. This study
supports Ekstrom's research (2015).
Interest rates have no significant effect on the
capital structure and firm value. High-interest rates
will lead to the high risk that leads to financial
distress. In accordance with the trade-off model that
theoretically balances the tax advantages of lending
(debt) to cover the financial difficulties. This study
supports Ekstrom's research (2015).
Interest rates do not affect the value of the firm;
it indicates that the change of interest does not cause
changes in the firm value. The results support
research from George (2008).
The exchange rate does not affect the capital
structure and firm value in SET. Changes in the
Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
51

exchange rate did not because a change in the value
of the firm since the company in Thailand used the
bath currency in its operations. The results support
the study of Taoulaou (2014).
GDP does not affect the capital structure and
firm value in SET. If economic growth rises / high,
then an indication that the prospect of investment is
good. Economic growth with firm value will move
in the same direction as increasing economic growth
will be caught as a signal of increased investment
activity so that the firm value will increase. This
study supports Ekstrom's research (2015).
ROA in IDX and SET shows that ROA has the
negative and significant effect on capital structure.
The results of this study are consistent with the
Packing Order Theory, Myers (1984) states that in
conducting a funding policy the company prioritizes
the use of retained earnings, then the use of debt and
new stock emissions. This study supports the
research of Pendy (2001), Nagano (2003),
Deesomsak, at.al (2004), Delcoure (2006), Huang &
Song (2006), Eni Safitri (2012), and Md Faruk H
(2012). ROA has a positive and significant impact
on the firm value in IDX and SET. The greater the
profitability, the higher the stock price in the firm
value. This study supports the research of Titman
and Tsyplakov (2005).
Non-Debt Tax Shields have no significant effect
on capital structure in IDX. Not influencing NDTS
shows that the value of depreciation and
amortization of existing companies in Indonesia is
not enough to increase the company's cash flow so it
is not taken into account in reducing the proportion
of debt. This study supports the research of Chen
(2004) and Akhtar (2005). The results of the SET
study show that NDTS has a positive and significant
effect on capital structure. This indicates that the
increase in NDTS can be used as a substitute for
debt. This study supports the research of Delcour
(2006), and Md Faruk H (2012). NDTS has a
negative and significant effect on the value of the
company in IDX. This indicates that the greater the
depreciation and amortization the greater the tax
savings so that the greater the accumulation of
resources will increase the firm value. This study
supports Deesomsak's research (2004), and Anshu
Handoo (2014). NDTS has no significant effect on
firm value in SET. This indicates that the amount of
depreciation and amortization is not significant
enough to increase the company's cash flow so as
not to affect the firm value.
The result of research in Indonesia shows that
CAPEX has the significant effect on capital
structure. The bigger the CAPEX the greater the
capital requirement of the company to meet its
needs, so that the company will seek funds from
outside that is by adding debt. This study supports
the research of Boodhoo Roshan (2009). The result
of research in SET shows that CAPEX has no
significant effect on capital structure. This is
because in Thailand in enlarging its fixed assets
using internal funds of the company. The results of
research on IDX and SET shows CAPEX has a
significant influence on firm value. The more long-
term investments (fixed assets) that provide benefits
in the future will increase the stock price or firm
value. This research supports the research of Coles,
et al (2004), Desak and Ni Wayan (2007), Sarpi
(2009), Rahmiati and Sari (2013).
The asset structure has no significant effect on
capital structure in IDX and SET. No effect on the
structure of assets on the capital structure because of
manufacturing firms in Indonesia and Thailand
because most of the fixed assets except land is
already on the watch in insurance or companies
prefer margins to minimize risk. So the size of the
company's asset structure does not affect the debt.
This study supports Nagano's (2003) and Taou you
(2014) research. The results of the research on IDX
show that the asset structure has no significant effect
on firm value. This result is not in accordance with
the hypothesis that predicts the greater the asset
structure the higher the value of the firm. This
research supports Solechan's research (2009). The
number of tangible fixed assets is not a prospect to
increase the firm value but stock holders in investing
capital will look at the prospect of companies that
earn a promising profit, thereby increasing the firm
value. While in Thailand, the asset structure has a
significant influence on the firm value. This research
supports the research of Fama (1978) and
Harmuningsih (2013).
The results of research on IDX and SET shows
CFD has no significant effect on capital structure.
This indicates that with the use of debt in the capital
structure is not affected by financial risk, it can be
said that debt to manufacturing companies in
Indonesia and Thailand is still at a level that can be
controlled by the company. This study supports the
research of Chen (2004), Teddy (2005). The results
of the research at IDX and SET show that CFD has
no significant effect on firm value. This indicates
that the use of debt can still be controlled with the
benefits obtained by the company so as not to affect
the firm value.
The results of the research on IDX and SET
shows the capital structure has a negative and
significant effect on firm value. Negative influence
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
52

means that the higher the capital structure will be the
smaller the firm value, so in accordance with the
packing order theory. This research supports the
research of Masdar (2008) and Rahmawati (2013).
6 CONCLUSIONS
Based on the results of research that has been done
can be concluded that:
1. Macro factors manufacturing companies in
Indonesia and Thailand have no effect on the
capital structure and firm value. Profitability,
CAPEX has the significant effect on capital
structure, while NDTS, asset structure, and CFD
have no significant effect on capital structure in
IDX. Profitability, NDTS has a significant
effect on capital structure, while CAPEX, asset
structure, and CFD have no significant effect on
capital structure in SET. ROA, NDTS, CAPEX
have the significant influence on firm value,
while asset structure and CFD have no
significant effect on firm value at IDX.
Profitability, CAPEX, asset structure have an
effect on significant to firm value, while tax
shields and cost of financial distress have no
significant effect on firm value in SET.
2. The capital structure directly affects the IDX
and SET.
3. Inflation, NDTS, asset structure has a
significant effect on firm value if it is mediated
by the capital structure in IDX. The exchange
rate, NDTS, CFD has a significant effect on
firm value if it is mediated by the capital
structure in SET.
4. Further research development can be
conducted on companies other than
manufacturing companies; external variables
plus political variables, technology, etc.; period
may be more than 5 years; and research objects
developed for example researching all ASEAN
countries.
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Determinants of Capital Structure and Its Impact on Firm Value on Manufacturing Companies at Indonesia Stock Exchange (IDX) and
Thailand Stock Exchange (SET)
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