2016•Unpublished venueRequires access

THE EFFECT OF CAPITAL STRUCTURE ON PROFITABILITY OF PROPERTYAND CONSTRUCTION COMPANIES IN INDONESIA

Hatane Semuel, Liske Widjojo

Abstract

The effect of capital structure on profitability has been discussed many times. The static order theory claims positive effect is given by capital structure, but the pecking order theory claims the contradictive one. Data of this paper is taken from 29 construction and property companies for 2009-2013 periods. The analysis method is structural equation modeling. The short term debt is founded positively affect on profitability. According to the result, property and construction companies in Indonesia should build more trust to short term debt sources’s such as property buyers, sub-contractors, and material suppliers.

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Key concepts: Capital structure, Profitability index, Pecking order theory, Debt, Business, Property (philosophy), Order (exchange), Capital (architecture)