Journal of International Business Research (Print ISSN: 1544-0222; Online ISSN: 1544-0230 )


Capitalization on Listed Companies in Indonesia

Author(s): Martani Oladipo

Thin capitalization is tax planning that carry out by improving as much as possible related to big business money owed. This tax planning will increase the interest expense and increase decrease in tax expense, by that/in that way increasing net income and firm value. Thin capitalization is measured by the ratio of total money owed to capital. This study analyses the factors that influence thin capitalization in companies in Indonesia and Australia. The moving backward test results show that companies with across-the-ocean smaller companies owned by larger companies, companies with smaller companies owned by larger companies in safe place countries, and companies that carry out export activities have a smaller thin capitalization value. The results of the study are usually not in line with previous research which states that these all numbers that change/things that change increase thin capitalization. The studies also find that foreign ownership has been proven to strengthen the relationship of foreign exposure to thin capitalization.

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