Capital Structure, Profitability, Liquidity, and Firm Size in Indonesia’s Healthcare Sector: A Dynamic Panel Data Approach
DOI:
https://doi.org/10.47747/fmiic.vi2.2964Abstract
This study investigates the effect of profitability, liquidity, and firm size on capital structure among healthcare companies listed on the Indonesia Stock Exchange, employing the theoretical framework of Pecking Order Theory. The sample was selected purposively based on specific criteria, and the data were analyzed using a dynamic panel regression model with a System-GMM two-step estimator to address endogeneity and structural dynamics. Capital structure is proxied by the Debt to Equity Ratio (DER), while the independent variables include Return on Assets (ROA), Current Ratio (CR), and the natural logarithm of total assets (LnTA). The empirical results indicate that profitability has a statistically significant negative effect on capital structure, affirming the core proposition of Pecking Order Theory that firms prioritize internal financing. In contrast, liquidity demonstrates a significant positive effect, suggesting that firms with stronger cash positions are more capable of securing external funding. Firm size does not exhibit a significant influence on capital structure. These findings suggest that financing preferences within Indonesia’s healthcare sector are more strongly influenced by internal financial efficiency than by scale economies. This study contributes both theoretically and methodologically and calls for future research to incorporate non-financial determinants, such as corporate governance and ownership structure, in analyzing capital structure decisions.
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