The Effect of Financial Performance on The Speed Adjustment of Capital Structure in Times of Crisis

Abstract

The capital structure is an important part of the company because it is closely related to the composition of the funding, errors in the composition of the funding have an impact on the company's failure to achieve the company's target and the risk of bankruptcy. The capital structure also indicates the importance of the portion of independent capital as well as from loans to run the company. Corporate bankruptcy often occurs due to being trapped by disproportionate debt, the impact of which is that the company is unable to pay for the forest, then sells the assets. Understanding theoretically that the composition of the capital structure needs to consider the company's financial performance, because by understanding the company's financial performance, managers can make decisions on the use of optimal capital structure for the company. Interestingly, various studies have begun to move towards research on the speed of capital structure, this is very important to study so that companies can empirically optimize their capital structure. The results showed that there were differences in the influence of financial performance factors on the speed of capital structure adjustment. This research indicates the need for company managers to be able to manage financial performance well, in order to obtain an ideal capital structure composition for company development.