The Nexus Between Relationship of Environmental Uncertainty and Capital Structure: Corporate Governance as Moderator

Abstract

Changes in the external environment create uncertainty for the company. This study aims to find empirical evidence of the effect of environmental uncertainty on the capital structure of companies moderated by corporate governance. The research was conducted on manufacturing companies in Indonesia during 2014-2018. Data were analyzed using moderated regression analysis. The findings show that the effect of environmental uncertainty on the company’s capital structure and the moderating ability of corporate governance strengthens the effect of environmental uncertainty on the company’s capital structure. The contribution of this finding is useful for company owners, where when environmental uncertainty is higher and corporate governance is getting better, it actually makes managers try to allocate greater debt into their capital structure. It is better if the owner does not easily believe in the results of performing of his managers and remains under periodic control. Another contribution of this finding is also reminiscent of the concept of pecking order theory, which has been underestimated.

Investigating the Role of Innovation in Inclusive and Sustainable Development in Ukraine and South Korea

“…The citation rates over the years showed that the highest rate of citations was in 2014, with 56 published articles (1340 in total). In this year, Lee J.H., Hancock M.G., and Hu M.-C. published the article "Towards an effective framework for building smart cities: Lessons from Seoul and San Francisco" [60] (Table 5). This was the third most cited article, with a citation rate equal to 402 times.…”