Debt Policy & Performance of State-Owned Companies in Indonesia

Abstract

The paper discusses factors determining debt policy of stated-owned companies in Indonesia. Furthermore, we examine the likely impacts of the policy on their performance. The data were derived from 152 non-financial companies which have been examined for 11 years, from 2010 to 2020. Data analysis is through two phases. First, it aims to explore factors that significantly determined their debt policy. This is carried out by adopting Structural Equation Modeling (SEM). Second, it is to examine the impacts of the policy on their performance using Autoregressive Distributed Lag (ARDL). The first analysis result showed that their debt policy significantly determined by collateral value of assets, profitability, company size, business risk, liquidity. However, those factors are partly clarified the policies; whereas, other factors outside the observation defined the rest. The result of the second analysis meanwhile showed that the debt policy has significant negative impact on the company performance both long-term and short-term period. The paper provides two valuable benefits, to increase literature on stated-owned companies which is very rare and to prove that no theory is able to accurately define debt policy