Strengthening The Capital Structure–Performance Link: Evidence On The Moderating Effect of Corporate Governance

Ulfah Muharramah; Tika Handayani; Wanda Septian; Zulpa Triana Putri

doi:10.36908/isbank.v12i1.1976

Authors

Ulfah Muharramah Politeknik Negeri Sriwijaya
Tika Handayani Politeknik Negeri Sriwijaya
Wanda Septian Politeknik Negeri Sriwijaya
Zulpa Triana Putri Politeknik Negeri Sriwijaya

DOI: https://doi.org/10.36908/isbank.v12i1.1976

Keywords:

Capital structure, firm performance, corporate governance, finance, manufacturing companies

Abstract

This study aims to analyze the effect of capital structure on firm performance, considering the moderating role of corporate governance. Capital structure is a strategic financial decision related to the composition of debt and equity used to finance the firm, which in turn affects profitability, operational efficiency, and firm value. However, prior studies show inconsistent results regarding this relationship, indicating the presence of contingency factors such as corporate governance. This study employs a quantitative approach with a causal research design. The population comprises manufacturing companies listed on the Indonesia Stock Exchange during 2021–2025. Using a purposive sampling technique, 84 companies were selected, yielding 420 firm-year observations. Secondary data were obtained from financial statements and annual reports, and analyzed using panel data regression combined with Moderated Regression Analysis (MRA) to test the moderating role of corporate governance. The results show that capital structure (proxied by DAR and DER) has no significant effect on firm performance (proxied by ROA), while corporate governance (the number of directors, the number of commissioners, and institutional ownership) is unable to moderate the relationship between capital structure and firm performance among manufacturing companies listed on the Indonesia Stock Exchange.

Downloads

Download data is not yet available.

References

Anozie, O. R., Muritala, T. A., Ininm, V. E., & Yisau, N. S. (2023). Impact of capital structure on financial performance of oil and gas firms in Nigeria. Future Business Journal, 9(1). https://doi.org/10.1186/s43093-023-00186-4

Arhinful, R., Amin, H. I. M., Mensah, L., Gyamfi, B. A., & Obeng, H. A. (2025). Determining an optimal capital structure and its impact on financial performance. Insight from the firms listed on the New York Stock Exchange. Cogent Economics and Finance, 13(1). https://doi.org/10.1080/23322039.2025.2571401

Boateng, P. Y., Ahamed, B. I., Soku, M. G., Addo, S. O., & Tetteh, L. A. (2022). Influencing factors that determine capital structure decisions: A review from the past to present. In Cogent Business and Management (Vol. 9, Number 1). Cogent OA. https://doi.org/10.1080/23311975.2022.2152647

Boshnak H. (2023). The impact of capital structure on firm performance: evidence from Saudi-listed firms. International Journal of Disclosure and Governance, 20(1), 15–26.

Dao, B. T. T., & Ta, T. D. N. (2020). A meta-analysis: capital structure and firm performance. Journal of Economics and Development, 22(1), 111–129. https://doi.org/10.1108/JED-12-2019-0072

Feni Nola, E. R., Setyahuni, S. W., Zaretta, B., & Subagyo, H. (2025). Peran Good Corporate Governance (GCG) Sebagai Faktor Pemoderasi Pengaruh Manajemen Asset dan Struktur Modal Terhadap Kinerja Keuangan. Jesya, 8(1), 474–485. https://doi.org/10.36778/jesya.v8i1.1952

Ferriswara, D., Sayidah, N., & Agus Buniarto, E. (2022). Does corporate governance, capital structure predict financial performance and firm value? (empirical study of Jakarta Islamic index). Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2147123

Gemilang, M. R., & Wiyono, S. (2022). Good corporate governance, struktur modal, leverage, dan ukuran perusahaan terhadap kinerja keuangan. Jurnal Ekonomi Trisakti, 2(2), 529–542. https://doi.org/10.25105/jet.v2i2.14048

Ghozali, I. (2013). Aplikasi Analisis Multivariate dengan Program IBM SPSS 21. Badan Penerbit Universitas Diponegoro.

Handayani, E., Yeni Anwar, F., Dwi Maryanto, R., & Nilawati, E. (2022). Pengaruh Dewan Direksi, Komisaris Independen, Komite Audit, dan Kepemilikan Institusional Terhadap Return On Asset (ROA) Perusahaan Perbankan yang Terdaftar pada Bursa Efek Indonesia Periode 2018-2022. 7(1). https://doi.org/10.37817/ikraith-ekonomika.v7i1

Jensen, M. C., & Meckling, W. H. (1976). Theory Of The Firm: Managerial Behavior, Agency Costs And Ownership Structure. In Journal of Financial Economics (Vol. 3). Q North-Holland Publishing Company.

Kementerian Perindustrian. (2025). Jadi Sumber Pertumbuhan Ekonomi, Kinerja Industri Manufaktur Terus Mendaki. Https://Kemenperin.Go.Id/.

Khaira Afiani, R., & Bernawati, Y. (2019). Mediating Effect of Financial Performance on Association Between Good Corporate Governance and Firm Value. KnE Social Sciences, 3(11), 604. https://doi.org/10.18502/kss.v3i11.4039

Kraus, A., & Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. Source: The Journal of Finance, 28(4), 911–922.

Mahrani, M., & Soewarno, N. (2018). The effect of good corporate governance mechanism and corporate social responsibility on financial performance with earnings management as mediating variable. Asian Journal of Accounting Research, 3(1), 41–60. https://doi.org/10.1108/AJAR-06-2018-0008

Ngatno, Apriatni, E. P., & Youlianto, A. (2021). Moderating effects of corporate governance mechanism on the relation between capital structure and firm performance. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2020.1866822

Nikhil, M. N., Shenoy, S. S., Chakraborty, S., & Lithin, B. M. (2024). Is the nexus between capital structure and firm performance asymmetric? An emerging market perspective. Cogent Economics and Finance, 12(1). https://doi.org/10.1080/23322039.2023.2296195

Opoku-Asante, K., Winful, E. C., Sharifzadeh, M., & Neubert, M. (2022). The Relationship Between Capital Sructure and Financial Performance of Firms in Ghana and Nigeria. European Journal of Business and Management Research, 7(1), 236–244. https://doi.org/10.24018/ejbmr.2022.7.1.1282

Sayidah, N., & Assagaf, A. (2020). Assessing variables affecting the financial distress of state-owned enterprises in Indonesia (Empirical study in non-financial sector). Business: Theory and Practice, 21(2), 545–554. https://doi.org/10.3846/btp.2020.11947

Setiawan, R., Moh, &, Syarif, M., Institusional, K., Perusahaan, K., Moderasi, E., Kepemilikan, D., & Aktif, I. (2019). Kepemilikan Institusional, Kinerja Perusahaan, dan Efek Moderasi dari Kepemilikan Institusional Aktif. 4(1).

Styawati, W., Dwi, R., Nazwa, S., Rahmah, A., Halizah, S. N., Sitorus, J. O., Saputra, P. H., & Rahmah, N. A. (2026). Analisis Pengaruh Struktur Modal terhadap Nilai Perusahaan Manufaktur: Studi Literatur pada Perusahaan yang Terdaftar di BEI. Al-Zayn: Jurnal Ilmu Sosial & Hukum, 4(1), 2026. https://doi.org/10.61104/alz.v4i1

Weston, J. F. , & C. T. E. (2007). Managerial finance (9th ed.). Dryden Press.

Xuan Nguyen, T., Tran, M. D., & Tai Do, D. (2025). The Relationship Between Capital Structure and Performance: The Case of Vietnam. SAGE Open, 15(2). https://doi.org/10.1177/21582440251343950