Role of Investment Opportunity Set (IOS) in Moderating the Influence of Company Size, Activity, and Profitability on Capital Structure in Multi-Industry Sector Companies for the Period 2015-2019

Abstract

Growing business competition expects companies to pay more attention to ensuring capital accessibility. Fulfillment of capital needs can be obtained both internally and externally from the company. The capital structure is important for every company because it directly affects the financial position of the company, therefore the financial manager must understand the factors that affect the capital structure to maximize the prosperity of the company's shareholders. The purpose of this research is to analyze and explain the influence of firm size, activity, and profitability on capital structure moderated by investment opportunity set in multi-industry sector companies. The population in this research is a multi-industry sector company listed on the Indonesia Stock Exchange, with a research period of 2015 to 2019. The selection of samples in this research used the purposive sampling method. The data analysis techniques used in this research are descriptive statistical analysis, classical assumption test, hypothesis test, and residual test for regression moderation analysis on SPSS. The results of this study showed that firm size and activity had a positive and significant effect, while profitability had a significant effect on the capital structure, Investment opportunity sets (IOS) play a role in moderating the influence of firm size, activity, and profitability on capital structures. The practical implications on this study, for investors who want to invest in the company, can consider the magnitude of the investment opportunites that the company has. Companies that have high investment opportunities it means companies have the opportunity to grow which has an impact on investors’ profits in the future. Companies with high market capitalization are considered good by investors because they can provide good stock returns through high stock prices. For companies, it helps managers in determining optimal capital structure policies in maximizing the company’s profit and creating well-being for investors.