The determinants of capital structure of manufacturing companies listed in LQ45 Index in Indonesia Stock Exchange period 2010–2014

The purpose of this study is to analyze the determinants of capital structure, consists of deficit, profitability and tangibility, and the influence of those variableson the use of short term debt, long term debt, and total debt, based on two perspectives namely peckingordertheory and trade-off theory. From the perspective of pecking order theory, company has a certain order to choose their financing decision. The order starts from internal to external financing. Thus, based on that, deficit has positive influence on the debts while profitability and tangibility have negative influence. From the perspective of trade off theory, debts are able to provide advantage to offset the tax value. Thus, deficit, profitability and tangibility have positive influence on the debts. The sample of this study is10 companies from manufacturing sector listed in LQ45 Index for period 2010–2014 with regressiontest as the analysis method. The results implied that in terms of the use of short term debt and total debt, financing decision of companieshad no path as suggested bypecking ordertheoryandtrade off theory, however, regarding the use of long term debt, the companies follow the specific order suggested by peckingordertheory.