| Capital Structure is a composition of long term debt containing interest, common stock and retained earnings. Theories explain that capital structure can balance risk and capital return, minimize weighted average cost of capital, increase earning per share and maximize firm value. The objective of a company is to increase its value, proxied through maximizing its common stock. Many development of analysis, both in theoretical and empirical research indicate that the decision pattern of capital structure is determined by industrial sector characteristic aggregately. Firm's geographical difference across countries also indicates a difference in the characteristic/factors of the firm's capital structure. Thus even though there's been many theories discuss about capital structure, so far there is no theory can explain the optimal composition of capital structure in financing decision. So we can conclude that so far there has been no capital structure that is considered optimal, including in Indonesia. The objective of this research is to examine how influencing are factors such as institutional and managerial ownership structure, dividend policy, asset structure, and asset level of growth and business risk to the capital structure.This research is conducted using the technique of-purposive sampling to 36 non financial public companies in the Jakarta Stock Exchange during the year 2004 - 2006. With multiple regression analysis as the tool, results indicate that the model is fitted with the assumption of Ordinary Least Square (OLS) as Best Linear Unbiased (BLUE). Institutional ownership structure, dividend policy as well as asset growth level influence the capital structure significantly. Yet simultaneously, 15.4 % variance of capital structure can be explained by the changing of institutional and managerial ownership structure, dividend policy, asset structure, asset level of growth and business risk to capital structure. Based on the result, firm and investor should still consider all factors which are the variables in this research regarding capital structure decision, so that it can achieve optimal value. With the firm's opportunity to add long term debt, creditor should keep monitoring to make sure the certainty of debt payment. While for next research,' it should add the research period and make the better model with adding the most appropriate characteristic or firm's external factors, for example : industrial classification, interest rate, inflation, exchange rate and government regulation. |