The effect of ownership structure on capital structure: evidence from Indonesia Banks

Bank institutions in Indonesia have three form of ownership structure. There are private, government and regional development banks. One of the unique banking in Indonesia is that there are regional development banks (RDB), which is a government-owned bank districts. This research investigates the effect ownership structure on the leverage decision of Indonesia banks. The sample of this study consists of 15 regional development banks, 56 private banks, and 3 central government banks from 1995 to 2006. Using panel data methodologies, we find that the central government bank negative effect on leverage, while regional development banks positive effect on leverage. This shows the role of central government banks use equity to maintain bankrupt because the bank did not give a great effect on public confidence in the banking system in Indonesia. While the regional development banks to get funding from local government through cash savings in the form of demand deposits. The crisis dummy expected a negative, is not statistically significant. In addition our result showed that ROE, assets tangible and total assets positive effect on leverage and ROA has a negative effect on leverage.