THE MODERATING EFFECT OF CORPORATE GOVERNANCE ON THE RELATIONSHIP OF ENVIRONMENTAL UNCERTAINTY AND CAPITAL STRUCTURE

Abstract

Changes that occur in the external environment create environmental uncertainty for the company. Environmental uncertainty requires the right strategy from company management so that the company can maintain its operational sustainability. Currently, a study on the uncertainty of the business environment focuses more on company performance. These circumstances create research gaps due to the possibility of changes in the corporate capital structure in a condition of environmental uncertainty to maintain company performance. This study aims to find empirical evidence of the influence of environmental uncertainty on the corporate capital structure. Also, this study aims to determine the role of corporate governance during the uncertainty of the business environment and its impact on the corporate capital structure. The study was conducted at manufacturing companies listed on the Indonesia Stock Exchange for the 2014-2018 period. The data used in this study were analyzed using the moderated regression analysis. The results showed that environmental uncertainty affects the corporate capital structure and corporate governance will strengthen the influence of environmental uncertainty on the corporate capital structure. The results indicated that when environmental uncertainty is high, company managers tend to allocate larger debt in the corporate capital structure. Moreover, when environmental uncertainty is high, good corporate governance tends to support company management to allocate larger debt to the corporate capital structure