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IJSTR >> Volume 7 - Issue 12, December 2018 Edition



International Journal of Scientific & Technology Research  
International Journal of Scientific & Technology Research

Website: http://www.ijstr.org

ISSN 2277-8616



Mitigating Risk On Capital Structure Decision

[Full Text]

 

AUTHOR(S)

Indah Martati, Suminto, Dyah Kusrihandayani

 

KEYWORDS

TATO, WCTO, DER, DR, PER, EPS, ROA, ROE, Mitigating Risk, Profitability.

 

ABSTRACT

This research is an explanatory research using secondary data in the form of annual audited financial statements for manufacturing company LQ45 in Indonesian Stock Exchange the 2012-2016 periods. The Population was 25 companies with 9 samples. The research aims to prove whether there is a causality relationship between variables that represent the capital structure and the variables that represent profitability in relation to risk prevention efforts. Spearman rank correlation test proves the existence of a causality relationship between Total Asset Turn Over (TATO), Working capital Turn over (WCTO), Debt Equity Ratio (DER), Debt Ratio (DR), Price Earnings Ratio (PER) with Return On Asset (ROA) and Return On Equity (ROE). Furthermore, earning per share (EPS) and prices do not correlate with ROA and ROE of manufacturing companies in LQ45 on the Indonesia Stock Exchange. It implies that in order to mitigate risk in determining the capital structure, it is necessary to maintain the variable stability that reflects the capital structure until the condition of the balance between debts and own capital occurs.

 

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