Year: 2025 | Month: December | Volume: 12 | Issue: 12 | Pages: 45-53
DOI: https://doi.org/10.52403/ijrr.20251206
The Influence of Collateral and Firm Age on the Capital Structure of Property and Real Estate Companies
Michael Teddy Fernando1, Noer Azam Achsani2, Lukytawati Anggraeni3
1,2,3School of Business, IPB University, Bogor, Indonesia.
Corresponding Author: Michael Teddy Fernando
ABSTRACT
This study examined the roles of collateral and firm age in shaping capital structure and their consequences for profitability among Indonesian listed property and real estate firms. Using secondary financial data for 32 company over 2017–2023, we employed panel-data regression. Capital structure was proxied by debt to total assets (DTA) and debt to equity ratio (DER), while performance is proxied by return on assets (ROA). The main variables include collateral (the proportion of inventories, PP&E, and accounts receivable to total assets), firm age, and the interaction between collateral and age, with controls for firm size, growth, liquidity, and a COVID-19 dummy. DTA and DER models are estimated to be using Panel-Corrected Standard Errors (PCSE), and the ROA model uses a Random-Effects Model (REM). The results indicate a relatively conservative capital structure. Collateral has a positive and significant effect on DTA, whereas firm age is not directly significant; however, the collateral–age interaction is positive and significant, implying that reputation and operating maturity enhance the ability of tangible assets to secure debt. Regarding performance, DTA exhibits a non-linear (inverted U-shape) relationship with ROA: higher leverage initially improves profitability up to an optimal point. The estimated optimal DTA is approximately 0.42 (≈42% of total assets), which maximizes ROA. These findings underscore the importance of managing collateral quality and leveraging firm maturity in financing policies and adopting dynamic capital-structure policies that keep leverage near the optimal range to maximize financial performance.
Keywords: collateral; firm age, capital structure; debt to total assets, debt to equity ratio, return on assets, PCSE, random effects, inverted U-shape; optimal leverag.
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