Somersault Justice!

…and dead end irony…

Archive for the month “June, 2006”


Note: Abstrak ini dibikin pake bahasa Inggris RPG standar, means, tidak merujuk ke salah satu negara (ditujukan buat mengelabui bahwa sebenernya skripsinya ngga penting-penting amat)… However, maunya si pake UK English, tapi orang Inggris pasti ketawa baca…



Over decades, numerous studies have been conducted to develop most fit corporate capital theory since Modiglianni and Miller’s seminal ‘neutral mutation’ propositions. This research lies upon two mainstream capital theories based on agency cost (Jensen and Meckling, 1976) and pecking order hierarchy (Myers 1982), as both have different conjectures considering the role of information asymmetry.
This research was performed primarily to investigate Indonesian corporate behaviour of capital expenditure and debt policies, and includes three core independent variables: internal cash flows, insider ownership, and investment opportunities. Data were collected through period 1999 – 2003, include pooled data from 96 companies purposively filtered from non-finance firms listed on BEJ.
This study extends prior derivative study of Griner’s capital expenditure model (Griner, 1995) employed by Hamidi (2003) and Sartono (2001), whereas it has received less attention from present researchers and literatures. Debt policy tests were performed employing Brailsford’s model, which proposed agency convergence-of-interest and managerial entrenchment hypothesis into a different context (Brailsford et al., 1999).
The empirical results provide support for a positive relationship of capital expenditure with both internal cash flows and investment opportunities, whilst insider ownership was proved has insignificant influence. These results also suggest that debt is straight and positively related with internal cash flows and investment opportunities, yet conversely has a curve-linear relationship with insider ownership. Eventually, no generalised conclusion supports neither managerial nor pecking order hypothesis, but overall, this study corroborates and parallel with most of pecking order rationales.

Keywords: pecking order hypothesis, managerial hypothesis, capital expenditure, capital structure, debt, investment opportunities, internal cash flows, insider ownership.

Post Navigation