The Influence of Capital Structure and Firm Size on Financial Performance

Riska Setyowati and Wuryaningsih Dwi Lestari ()
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Riska Setyowati: Universitas Muhammadiyah Surakarta (UMS), Management Department, Faculty of Economics and Business
Wuryaningsih Dwi Lestari: Universitas Muhammadiyah Surakarta (UMS), Management Department, Faculty of Economics and Business

A chapter in Proceedings of the International Conference on Economics and Business Studies (ICOEBS-22-2), 2024, pp 905-922 from Springer

Abstract: Abstract This study was conducted aiming to determine the effect of Capital Structure and Firm Size on Finance in financial sector companies in the insurance sub-sector listed on the Indonesia Stock Exchange (IDX) where financial performance is projected using a profitability ratio, which is a ratio to provide a level of management effectiveness of a company represented by Return on Assets (ROA). Capital structure as measured using the Debt to Equity Ratio can be defined as a measure in analyzing financial statements to show the amount of collateral available for creditors and company size seen from the total assets owned by the company. This type of research used is quantitative research. The data used is secondary data, using annual data for the period January 2017 - December 2021, so that a total of 75 data are obtained (15 companies × 5 years). The analysis used is panel data regression using EVIEWS 10. The results of the F test show that the independent variables Capital Structure and Company Size simultaneously have a significant effect on Return on Assets (ROA). It can be seen that the probability value (F-statistic) is 0.000000 less than 0 .05, then Capital Structure and Firm Size (Size) simultaneously have a significant effect on Financial Performance (ROA). The results of the t test show that Capital Structure has a negative and significant effect on Return On Assets (ROA) and Company Size has a positive and insignificant effect on Return On Assets (ROA). The value of the Capital Structure variable has a probability of 0.0039 less than a significant value of 0.05, so the Capital Structure variable has a significant effect on Financial Performance. The coefficient of the Capital Structure variable -0.005878 has a negative effect. The variable value of firm size has a probability of 0.8363, more than a significant value of 0.05, so the variable firm size has no significant effect on financial performance. The coefficient of the variable Firm Size 0.000272 has a positive effect. The determination test (R2) obtained an Adjusted R-Squared value of 0.700595 or 70.0595%. This means that ROA can be explained by the Capital Structure and Company Size (Size) of 70.0595%. While the remaining 29.9405% is influenced by variables outside the study.

Keywords: Capital Structure; Firm Size; Return On Assets (ROA); Financial Performance (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-204-0_75

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