Consistency of Pecking Order Theory : Evidence from Indonesia Capital Market

Financial crisis in some developing country have affected Indonesia as a developing country as well. It changes business climate that force firms finds additional funding sources. Improper capital structure policy will give negative signal to investors about firm’s financial performance and future prospect, which in turn affects stock price of the firm. Pecking Order Theory states that firms has defined yet the target debt ratio and that companies prefer to use internal financing first, then debt, and finally new equity. This research aims to test consistency of pecking order theory in term of flexibility of capital structure policy of listed companies in Indonesian Capital Market in the crisis circumstances. And analyze testing the influence on the value of the firm. Research population is taken from public listed company in Indonesia capital market since 2015-2018 with assets worth 1 thousand million. Data analyzing technique to answer the research question and analyze the research hypothesis uses factor analysis and simple linear regression. The result shows that is proved that there is consistency of influence POT/pecking order theory policy on the value of the firm in Indonesian Capital Market since 2015 to 2018