Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

Usage of Debt and the Probability of Increased Profits

Author(s): S. Martono, Yulianto, Arief, Wijaya, A.P

The purpose of this paper is to investigate how relationship usage of debt and probability of Increased Profit in the context a manufacturing industry in Indonesia as Emerging Market. The Study utilized a cross sectional design and investigated the relationship performance on a sample of 611 unit of observation from the Manufacturing sector in Indonesia period 2009 – 2018. Data analysis uses logistic regression. The findings are asymmetric information between debtholders and shareholders resulted in the use debt in some manufacturing companies with heterogeneous sub-sectors for a significant investment. Consequently, companies in intra-industry (manufactures) need to consider the relationship between the level of debt and asymmetric information produced by their characteristics. The predictions has been criticized inability to adjusted with market timing of debt or equity. The study to extend of relationship usage short term debt and profitability through logistic regression and marginal profitability. The study implies to manager to create to handle debt is optimal for investment, therefore agency problem will decrease.

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