Capital Structure Adjustment Speed in Indonesia Health Sector Companies

Abstract

This study contributes to the existing literature on capital structure by providing evidence regarding the existence of a target capital structure, the estimated speed of adjustment, and the factors influencing it. The concept of speed adjustment begins with dynamic trade-off theory with the aim that the company achieves optimal leverage targets. This paper aims to examine the determinants of capital structure and speed of adjustment in Indonesia's Health Sector companies. For this purpose, we use the Generalized Method of Moments estimation technique. The results of this study indicate that the health sector companies adjust their capital structure towards the optimal capital structure with an average adjustment period of 1.17 years. The test results also show that distance and financial deficit/surplus did not significantly affect the speed of adjustment of the company's capital structure.