Vol. 4 No. 2 (2014), Articles
Vol. 4 No. 2 (2014)

The effect of market-to-book ratio, asset structure, and earning after tax on the level of leverage in non-financial companies listed in Indonesia Stock Exchange 2007-2012

Articles
DOI: 10.14414/tiar.v4i02.330
Published 2014-12-01
Rezza Arlinda Sarwendhi
STIE Perbanas Surabaya
Agus Samekto
STIE Perbanas Surabaya

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Keywords

Market-to-Book-Ratio
Market Timing Theory
Book Leverage
Market Leverage

How to Cite

Sarwendhi, Rezza Arlinda, and Agus Samekto. “The Effect of Market-to-Book Ratio, Asset Structure, and Earning After Tax on the Level of Leverage in Non-Financial Companies Listed in Indonesia Stock Exchange 2007-2012”. The Indonesian Accounting Review, vol. 4, no. 2, Dec. 2014, pp. 149-56, https://doi.org/10.14414/tiar.v4i02.330.
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Abstract

The theory of capital structure has experienced remarkable development. This development enables companies to have many options to consider the external factors in determining various compositions of the companies’ debts and equities. In this study, the researcher uses theoretical basis of Market Timing Theory (MTT) introduced by Baker and Wurgler (2002). The result of this study indicates that marketto-book ratio has a negative effect on the level of company leverage. This is also proven on the factors of earning after tax and asset structure of the company. The implication of this study is that when the company obtains lower level of leverage, there will be overvalue on the stock price, and it would be the right time for the company to release the shares.