Keywords:
capital structure
liquidity
asset structure
profitability
panel data analysis
Indonesia

  • Abstract

    The intense rivalry that exists in the business sector, particularly in the extractive industry, compels companies to enhance their corporate performance to accomplish their objectives. A considerable proportion of Indonesian business owners, particularly those who are dependent on imported raw materials, are profoundly concerned about the depreciation of the country's currency. It is possible that the following may lead to substantial discrepancies in the cost of producing raw materials in comparison to the earlier projections, which will necessitate a significant amount of financial resources. The purpose of this study is to investigate the relationship between the Return on Assets (ROA), Fixed Asset Ratio (FAR), and Current Ratio (CR) and the Debt-to-Equity Ratio (DER) in extractive firms that are listed on the Indonesia Stock Exchange from 2018 to 2022. Out of a total of 84 extractive companies, a sample size of 18 enterprises was selected by using purposive sampling technique. Within the scope of the study, a multiple regression analysis was conducted using a robust panel data model. The findings of the study indicated that profitability, as determined by return on assets (ROA), and liquidity, as represented by current ratio (CR), have the potential to have a large and detrimental effect on capital structure. Meanwhile, the asset structure, as assessed by the Fixed Asset Ratio (FAR), had no impact on the capital structure. This study has the potential to assist firms in determining the critical components that determine the optimal balance of debt and equity, which ultimately result in improved financial performance.

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Digdowiseiso, K., & Amalia, B. (2025). Investigating the determinants of capital structure on extractive companies in Indonesia. Multidisciplinary Science Journal, 7(9), 2025438. https://doi.org/10.31893/multiscience.2025438
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