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

Hidenobu Okuda and Yasushi Take

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

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.

Keywords: Corporate Finance; Capital Structure; Ethnic network; Indonesia (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-cfn and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd09-108

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