The Controlling of Ownership on the relationship between Financial Performance and Capital Structure in Indonesia

The purpose of the study was to determine the determinants of the firms' capital structure concerning their maximum financial performance. To reach this aim, the data of the financial statements firms of Indonesia were used. As the first method, a Pearson correlation matrix was applied to determine a statistically significant correlation between capital structure indicator (debt-to-assets ratio) and financial performance and ownership of the firms. The analysis used the data panel multiple regression model to assess the effect of these independent and controlling variables on leverage. Some findings are that profitability has positive (ROA) and negative (ROE) effect on leverage. MBV and tangibility do not affect the capital structure, and firm size negatively impacts on it. In this panel analysis, it was confirmed that the managerial and institutional ownership impact on leverage negatively and positively, respectively. By decreasing the sales growth, the debt ratio entity rises, or they have a negative relationship. Based on these findings, it can be stated that financial performances influenced the capital structure.