Capital Structure Determinants of Public Infrastructure Companies in Indonesia

The infrastructure utilization concept is a service that is created by certain or several infrastructures over a certain period. The service output should increase a region or nation’s productivity over time, stimulating economic growth. Under the leadership of President Joko Widodo, developing the infrastructure is one of the government’s priorities to support Indonesia’s economic development. The government invested in infrastructure USD 429.7 billion in 2020-2024, which is up 20% compared to 2015-2019. The financial characteristic of the infrastructure sector is the steady cash flow due to the revenue model, which makes it easy to predict so it can utilize to gain high-level leverage. High-level leverage also possesses a huge risk, it requires the company or project’s ability to generate revenue to pay the financing interest. Due to the risks that are possessed by the infrastructure industry, the capital structure needs to be managed carefully. This study is to analyze the capital structure’s determinants, which have a significant impact.

The population is all companies in the infrastructure sector listed on Indonesia Stock Exchange (IDX). The data that will be used is obtained from audited company reports. An unbalanced panel data regression with GLS estimators is used to examine the secondary data. The static capital structure model will be the model that is used in this study. The static capital structures are based on the trade-off theory. Determinants of capital structure based on the static model are profitability, tangibility, growth, and liquidity. Profitability, tangibility, and liquidity positively affect the leverage ratio, while growth has a negative significant effect. Profitability has the highest impact among the determinants that have a positive impact. Which means that leverage is highly affected by it.