DETERMINANTS OF CAPITAL STRUCTURE OF CONSUMER FINANCE COMPANY

Abstract

The aim of this research is to study the determinants of the capital structure of non-bank financial
institutions. Non-bank financial institutions include finance companies such as consumer
finance, leasing, and factoring. Determining the capital structure is an important challenge for
finance companies. A finance company must manage the gap in funding between short-/longterm and fixed rates against the floating interest rate. Total assets of finance companies in
Indonesia amount to more than IDR 500 trillion in 2018. The industry is also considered one of
the fastest growing industries during the last 15 years. In this study, we have analyzed the five
major financial ratios and the impact of alliance. We use the leverage ratio as the proxy of capital
structure and the panel data technique. The sample consists of 90 finance companies covering the
period of 2010-2016. The empirical results show that the determinants of finance companies’
capital structure are the asset composition, firm size, equity size, and profitability. In contrast,
support of the parent company and firm efficiency have no impact on the capital structure.
JEL: G23, G32