The relationship between capital structure, firm performance and a firm’s market competitiveness: Evidence from Indonesia


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Market competitiveness shows a condition where a company can enter the market and survive in that market. In an economic environment experiencing a global crisis, it is important to study the factors of company competitiveness so that companies can compete in the global market. Therefore, this study aims to examine the relationship between the influence of capital structure, firm performance, and market competitiveness. This study took samples from manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period 2018 to 2020. The data collected are panel data that are quantitative in nature, analyzed by multiple regression, which is processed using the Eviews 9 software. The variables used are debt to asset ratio, debt to equity ratio, and current assets as indicators of capital structure, and return on assets and return on equity as indicators of firm performance are placed as independent variables, and firm size as control variables. The dependent variable is market competitiveness, which is proxied using the Herfindahl-Hirschman Index (HHI) measurement. The results of the analysis show that the debt to asset ratio, debt to equity ratio, return on assets, and firm size have no effect on market competitiveness. However, the current ratio has a negative effect, while the return on equity has a positive effect on market competitiveness. Thus, firm size does not act as a control variable in influencing market competitiveness.

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    • Table 1. Description of study variables
    • Table 2. Descriptive statistics
    • Table 3. Selection of the regression model
    • Table 4. Panel data regression output
    • Conceptualization
      Andi Kartika, Moch Irsad, Bambang Sudiyatno
    • Data curation
      Andi Kartika
    • Investigation
      Andi Kartika, Moch Irsad, Bambang Sudiyatno
    • Methodology
      Andi Kartika, Mulyobudi Setiawan, Bambang Sudiyatno
    • Validation
      Andi Kartika, Mulyobudi Setiawan, Bambang Sudiyatno
    • Visualization
      Andi Kartika, Mulyobudi Setiawan
    • Project administration
      Moch Irsad, Mulyobudi Setiawan
    • Writing – original draft
      Moch Irsad
    • Writing – review & editing
      Moch Irsad
    • Supervision
      Mulyobudi Setiawan, Bambang Sudiyatno
    • Formal Analysis
      Bambang Sudiyatno