MACROECONOMICS, INDUSTRIAL SENSITIVITY AND CAPITAL STRUCTURE –THE CORPORATE INVESTMENT DECISION

Diyan Lestari, Vina Meliana (2016) Macroeconomics, Industrial Sensitivity And Capital Structure –the Corporate Investment Decision

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ABSTRACT

Every economic condition has its own effect on corporate investment decision. The good economic condition may have positive effect on business and vice versa. The economic uncertainty would be seen as a big risk for almost all the decision makers in a coun try. Indonesia has one of the largest economies in Southeast Asia, with GDP growth 4,8% in 2015, and with several economic events, it effects fluctuation in business activities. Furthermore, the capital structure indicates the risk preference of a company. It can be positive or negative signal to investors, and it‟s very crucial in investment decision making. Using listed manufacturing firms in IDX from 2009 – 2015, this study indicates there is a positive effect of capital structure on corporate investment decision. Industrial sensitivity strengthens the effect of macroeconomics on investment decision, in a good economic condition, sensitive industry will respon positively and make easier decision on investment.

Keywords : macroeconomics, industrial sentivity, capital structure, investment decision

REFERENSI

THE 1 st ICONLEE The First International Conference on Law, Economics and Education Muhammadiyah University of Metro, Indonesia 20 │ECONOMICS result in GDP growth is not significant, indicates that companies do not see the GDP growth as the basic tools that effect their investment decision. GDP, as a unit of measure has not kept pace with changing nature of economic. Currently, GDP may not become a powerful measurement and may fail to capture the complex trade - offs between pres ent and future, „good‟ growth and „bad‟ growth [ 34 ] . In Indonesia, consumer confidence index measures consumer‟s expectations about current income and job availability against those 6 months ago, appropriate time to buy durable goods, and general economic conditions and job availability expectations in the next 6 months. Oprea and Brad stated consumer confidence index may reflect the investor sentiment [ 35 ]. Investor sentiment is defined as the tendency of the investors to speculate. This attitude often as sociated with the investors psychology [ 36 ]. In positive condition, investors tend to use their routin strategies, while in negative condition; they will tend to take some consideration and analysis in making decision [ 37 ]. Then Brown and Cliff describe se ntiment as the expextations of a market participant to a norm [38 ]. Average investors is a zero sentiment person, but bullish (bearish) investors often expect the higher returns (lower returns) than the average investors. The higher sentiment may push the stock price away from its fundamental value. Capital structure has positive effect and significant on investment decision. It is not consistent with the hypothesis that capital structure has negative effect on investment decision. The positive effect is an indicator that high leverage will be positive signal to invest. Companies should evaluate their capital structure before making investment decision. The result shows that a company with a good project investment will continue to grow th [39 ]. Furthermore, the positive and significant result, indicates that leverage is a strategical option to growth, as signal that companies try to optimze the investment opportunities [ 40 ] . Table 3 shows the regression result with the industry sensitivity as moderating variab le in macro economic on investment decision. From the resut, we can see that R 2 and adjusted R 2 in regression result is 0.925570 and 0.912221. The regression result without moderating variable is 0.925377 and 0.912153. From the result we can conclude that industry sensitivity strengthen the effect of macro economic on investment decision. Industry can respond differently in any kind of econoomic condition. A cyclical company usually has higher fluctuation degree [ 41 ]. Table 3. 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