Analysis of Capital Structure on Multinational Corporation: Trade off Theory and Pecking Theory Perspective

Abstract

The research aims to analyses the capital structure applied in multinational companies for the effectiveness and efficiency of the company's financing. This research uses independent variables i.e. business risk, asset growth, and cash flow volatility. The population of this research consists of all companies listed on the Indonesia Stock Exchange from year 2010-2019. The study took samples with the technical purposive sampling of multinational corporations that are non-financial institutions. Data analysis methods use multiple liner regression. The results showed that the capital structuring analysis was heavily influenced by business risk, asset growth, and cash flow volatility. That is, the company in determining the policy on managing the proportion of debt and equity as a source of funding the company can consider the condition of business risk, growth of assets, and volatility of cash flows owned by companies.