Capital structure decisions in Indonesia’s property and real estate sector are significantly influenced by profitability and firm size, while operating leverage shows no meaningful effect. This finding comes from a 2026 study by Felita Wihelmina Karepu, Jullie J. Sondakh, and Rudy J. Pusung from Sam Ratulangi University, examining companies listed on the Indonesia Stock Exchange during 2021–2024. The results provide critical insight into corporate financing strategies during the post-pandemic recovery period.
The property and real estate sector plays a strategic role in Indonesia’s economy, supporting housing demand and driving related industries such as construction and banking. However, between 2021 and 2024, the sector experienced fluctuating growth due to rising interest rates and increasing construction material costs. These conditions have forced companies to carefully manage their financing structures to maintain financial stability.
Research Method
The study analyzed 27 property and real estate companies, resulting in 108 observations over a four-year period. Data were processed using multiple linear regression to examine the influence of key financial factors on capital structure.
The variables examined include:
- Profitability
- Operating leverage
- Firm size
- Capital structure
Key Findings
The results reveal clear relationships:
- Profitability has a significant effect on capital structure
- Firm size also has a significant effect
- Operating leverage shows no significant impact
These findings indicate that more profitable firms tend to rely on internal financing, while larger companies have greater access to external funding sources.
Interpretation
The study supports the Pecking Order Theory, which suggests that firms prioritize internal funds before seeking external financing.
Felita Wihelmina Karepu and her colleagues from Sam Ratulangi University explain that higher profitability enables companies to reduce dependence on debt, thereby lowering financial risk.
Meanwhile, firm size reflects financial stability and credibility, making it easier for larger companies to obtain loans and other external funding.
Implications for Business and Policy
The findings offer several practical insights:
- Companies should improve profitability to strengthen capital structure
- Larger firms can optimize access to external financing
- Financial risk management should focus on balancing debt and equity
- Policymakers can support the sector through financing and stability policies
For investors, the study provides a useful reference for evaluating financial health and funding strategies in property companies.
Author Profile
- Felita Wihelmina Karepu– Sam Ratulangi University, Indonesia
- Jullie J. Sondakh–Sam Ratulangi University, Indonesia
- Rudy J. Pusung – Sam Ratulangi University, Indonesia
Source
Title: The Effect of Profitability, Operating Leverage, and Company Size on the Capital Structure of Property and Real Estate Companies Listed on the Indonesia Stock Exchange in 2021–2024
Journal: International Journal of Business and Applied Economics (IJBAE)
Year: 2026
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