Sutapa Sutapa

Indonesia

Hendri Setyawan

Indonesia

Heri Laksito
The objective of this study was to test empirically whether capital structure decision of Indonesian firms followed a hierarchy of sources of finance called Pecking Order. Samples in this study were 29 firms listed in Jakarta Islamic Index (JII) from 2001 to 2004. Variabels used as proxy of Pecking Order Theory (POT) were profitability, investment opportunity and firm size. The results of this study were as follows: a). simultaneously, all proxies for POT could explain capital structure at Indonesian Capital Market, b). more profitable firms were less levered, c). bigger firms were more levered, d). result for investment opportunity did not support hypothesis. Firms listed at JII tended to follow POT in their financing decision. Part of results of this study was consistent with study of Wiwattanakantang (1999), Fama and French (2002), Benito (2003) and Mutamimah (2003).
Indonesia