The Effect of Rentability and Liquidity on Capital Structure of Banking Companies Listed on the Indonesia Stock Exchange (IDX) 2022-2024

Abstract

The banking sector plays an important role in the Indonesian economy as a financial intermediary that collects and distributes funds to support economic activities. The financial performance of banks is closely related to their ability to generate returns (rentability) and maintain liquidity to meet short-term obligations. Capital structure is a crucial aspect of banking financial policy as it reflects the balance between debt and equity financing. This study aims to analyze the effect of rentability and liquidity on the capital structure of banking companies listed on the Indonesia Stock Exchange during the 2022-2024 period. This study employs a quantitative approach using secondary data obtained from the annual financial statements of banking companies. The research sample consists of 43 banking companies selected through purposive sampling, resulting in 129 observations. Data analysis techniques include descriptive statistical analysis, panel data regression analysis, classical assumption tests, hypothesis testing, and coefficient of determination analysis using EViews 13 software. The results indicate that rentability does not have a significant effect on capital structure, while liquidity has a negative and significant effect on capital structure. Simultaneously, rentability and liquidity significantly affect capital structure, indicating that banking capital structure decisions are influenced by both rentability and liquidity conditions in accordance with the Trade-Off Theory.