The Effect of Financial Constraints and Financial Risk on Capital Structure with Profitability and Tangibility as Moderating Variables

Abstract

Optimal capital structure is an important decision in corporate financial management, but it is often influenced by financing limitations and the level of risk faced. This study investigates the effect of financial constraints and financial risks on corporate capital structure, with profitability and asset tangibility as moderating variables. This study uses a quantitative method with secondary data obtained from the annual financial reports of companies listed on the Indonesia Stock Exchange (IDX). The results of the study indicate that financial constraints and financial risks have a significant effect on capital structure. Profitability and tangibility are proven to moderate the relationship, where profitability weakens the effect of financial constraints on capital structure, while tangibility strengthens the effect of financial risk on capital structure. These findings provide important implications for financial managers in determining adaptive funding policies to the company's internal and external conditions.