ANALYSIS AN ASSET STRUCTURE, ROE AND R/E INFLUENCE ON CAPITAL STRUCTURE AND ITS INFLUENCE TOWARD EPS

A THESIS

Presented as Partial Fufillment of the Requirements to Obtain the Bachelor Degree in Accounting Department

By: DIATRI ANDRINI Student Number: 00 312 343

DEPARTMENT OF ACCOUNTING FACULTY OF ECONOMICS INTERNATIONAL PROGRAM ISLAMIC UNIVERSITY OF INDONESIA YOGYAKARTA 2005

ANALYSIS AN ASSET STRUCTURES, ROE AND R/E INFLUENCE ON CAPITAL STRUCTURE AND ITS INLFUENCE TOWARD TO EPS

BY DIATRI ANDRINI Student Number : 00.312.343

Approved By

Thesis Advisor

.......................... Achmad Sobirin, Drs, M.Akt, Ph.d

..... - ................. - ........

Language Advisor

............................... Widyasari Listyowulan

..... - ................. - ........

ANALYSIS AN ASSET STRUCTURES, ROE AND R/E INFLUENCE ON CAPITAL STRUCTURE AND ITS INLFUENCE TOWARD TO EPS

A BACHELOR DEGREE THESIS By DIATRI ANDRINI Student Number : 00.312.343

Defended Before The Board of Examiners on .... - ................ - ..... and Declared Accpetable

Board of Examiners

Examiner 1:

Arief Bachtiar, Drs.,MSA.,Ak Examiner 2:

....................................

Achmad Sobirin, Drs, M.Akt, Ph.d

....................................

Yogyakarta, - .... - International Program Faculty of Economics Islamic University of Indonesia Dean

---------------------Asmai Ishak, Drs., M.bus., Ph.D

ACKNOWLEDGEMENT

Diatri Andrini (2006) ; Analysis An Asset Structure, ROE And R/E Influence To Capital Structure and Its Inlfuence Toward EPS To Determione The Optimalization Praise Allah S.W.T for all His unlimited and priceless blessings that always give the writer way of strength from the beginning of this thesis until its completion. (Alhamdulillah Hirabbill Allamin). This thesis is made to fulfil the writers responsibility as the student of Islamic University of Indonesia as the requisites to the completion of the study and the achievement of Bachelor Degree of Economics. The writer hopes that this thesis is able to give several benefits and also as the media to obtain more knowledge for those who may needs the information contains in this thesis. Moreover, the writer addresses her apology if this thesis is not a perfect one. The writer may hope for several corrections further to elaborate this thesis better. At this opportunity, the writer would like to address her gratitude to the following people who shares their precious time, thoughts, power, and patience both directly and indirectly. 1. Dean of Faculty of Economics UII, Mr. Asmai Ishak, Drs., M.Bus., Ph. D. for his leadership and providing several facilities that support and make the academic activities more comfortable. 2. Academicals Advisor, Mr. M. Akhyar Adnan, Drs., MBA., Ph.D. for his opportunity and giving the simplicity in the Independence Study to revise my grade. 3. Thesis advisor, Mr. Achmad Sobirin, Drs., Ph.D for the time and patience. You guide on finishing this thesis and inspiring me to select my choice. The way you taught, even just one at MCS and how you delivered certain theme and knowledge succeed to influence me and attract my thought. 4. My only one beloved father, (Alm.) Dr. Indrawarman Seno Adjie. Though I only remember you by memories and pictures, it is you who becomes my source of life and spirit. You always guide me and remind me and become the reason of everything. I am still not the person that you want to be, but my journey is still far. I promise to be the one who makes you smile in Heaven. You are my only Angel.

5. My lovely family, my mother, sister and big brother for your prayers and supports. Thank you for your both financial and non-financial support, your advice became my shelter and brought peace to my heart. You are all my light of my life, especially for my mother, you are my soul. 6. My best ever have. Thank you for your patience, time for share, especially for showing the other side of life. It changes the way I thought and saw before. Lets hope that we can achieve our own dreams and one day we can be a best partner, brother and sister. To be the best ever have in our life. 7. My friends in Faculty of Economics UII. Thank you for your time, supports, helps, jokes, and shares. There are many more that influences me, together with you all comforts my heart. Though we separate by time and place, I believe that friends last forever. 8. All my friends in Solo. Thank you for your spare time. Seeing your jokes makes me laugh and smile. You are always there for my pc games, fixing my computer, advising me on buying computer parts. I believe I will lose and being fake without you all. 9. This goes for those whom I cannot mention. I dont mean to forget you, but there are too many to be remembered. I just hope best wishes for your future.

Sincerely yours, Diatri Andrini

TABLE OF CONTENT Page Page of Title Approval Page Legalization Page Acknowledgement Table of Content List of Table ............................................................................................... ............................................................................................ i ii

......................................................................................... iii ....................................................................................... iv ........................................................................................... v

............................................................................................... vi

List of Graphic ................................................................................................ vii List of Appendice ............................................................................................ viii Abstract (English) ............................................................................................ ix Abstract (Indonesia) ......................................................................................... x

Chapter I : INTRODUCTION 1.1. Study Background .. 1 1.2. Problem Identification . 4 1.3. Problem formulation 4 1.4. Limitation of research Area . 5 1.5. Research Objectives . 6 1.6. Research Contribution . 6

1.7. Writing Structure . 6 1.8. Definition of Terms . 8

Chapter II: REVIEW RELATED LITERATURE 2.1. Theoretical review . 10 2.1.1. Functions of Finance . 10 2.1.2. The Choices in Financing . 11 2.1.3. Understanding Capital Structure 15 2.1.4. Maximizing Value of Firms 18 2.2. Theoretical Framework 22 2.3. Review Previous Research . . 24 2.4. Hypothesis Formulation .. 28

Chapter III: RESEARCH METHOD 3.1. Type of Research Method .. 30 3.2. Research Subject . 30 3.2.1. Population and Sample . 30 3.3. Research Setting . 31 3.4. Research Instrument .. 31

3.5. Research Variables . 32 3.6. Research Procedure 33 3.7. Technique Data Analysis 34

Chapter IV: RESEARCH FINDINGS, DISCUSSION, AND IMPLICATIONS 4.1. Research Description . 40 4.2. Research Analysis .. 41

4.2.1. First Step of Analysis . 41 4.2.2. Second Step of Analysis . 51 4.3. Research Findings 55

4.3.1. First Step Analysis Findings .. 55 4.3.2. Second Step Analysis Findings . 56

4.4 Research implications 56 4.4.1 Capital Structure 57

4.4.2 Earning Per Share .. 57

Chapter V: CONCLUSION AND RECOMMENDATION 5.1. Conclusion 59 5.2. Recommendation . 62

BIBLIOGRAPHY APPENDICES

LIST OF TABLE

Page TABLE.I. Sampling-using Purposive Random Sampling .. 30 TABLE.II. Regression Analysis of X variables to Y1 variable ......... TABLE.III. Multicolinaerity Test Result . TABLE.IV. Autocorrelation Test Analysis Result
..

42 49 49 50 52

TABLE.V. Heteroskedasity Test Analysis Result . TABLE.VI. Regression Analysis of Y2 variables to Y1 variable ..

LIST OF GRAPHIC

Page GRAPHIC.I. Theoretical Framework . GRAPHIC.II. Accepted and Rejected Area Hypothesis of F-test-first step analysis 45 GRAPHIC.III. Accepted and Rejected Area Hypothesis of Asset Structure variable . 46 22

GRAPHIC.IV. Accepted and Rejected Area Hypothesis of ROE variable .. 47 GRAPHIC.V. Accepted and Rejected Area Hypothesis of R/E variable . 48 GRAPHIC.VI. Accepted and Rejected Area Hypothesis of EPS variable 54

LIST OF APPENDICE

Page Appendix - I First Step Regression Analysis ... 63 Appendix - II Second Step regression Analysis .. 64 Appendix - III Data Tabulation 65 Appendix - IV Durbin-Watson Table .. 68 Appendix - V F-table .. 69 Appendix - VI T-table 70

Appendix of Manufacturing Companies Financial Statement Year 2000-2003

ABSTRACT
Capital is a basic need for firms to start their business and expand-known as globalization. To deal with globalization, firms should concern on financing problems that focused on capital structure. Capital effect on the firms ability to survive and compete with others firms (strong capital can kill the weak one). So it is important for firms to make their financing decision-capital structure decision, that is the choice between debt or equity financing. The best proportion between debt and equity used will enter firms into the optimal capital structure. Some of important judgemental issues should be applied consider to an optimal capital structure The aims of the research are: (1) to find out the magnitude of the asset structures, return on equity-ROE and retained earnings-R/E variables influence on the capital structure, and the magnitude of the capital structure variables influence on the earning per share, (2) which variable influences the most significant and dominant on the capital structure One hundred and fifty-five go-public manufacturing companies in the JSX were used as the population, and only eighty-four companies were collected as the samples using the purposive random sampling technique. Recursive Models of the Linear Regression, which was used as the analysis model, divided into two steps: (1) regressing the magnitude of the asset structure, return on equity-ROE and retained earnings-R/E variables as the independent variables on the Capital structure as the dependent variable, (2) regressing the magnitude of the capital structure variables as the independent variables on the earning per share-EPS as the dependent variable. Related to the aims, the results showed: (1) simultaneously, the three variables significantly influenced the capital structure (F-stat; 1955, 066 > Ftab;2,37 and p;0,000 < 0,05); whereas, partially, ROE significantly influenced (Tstat;30,770 > T-tab ;1, 67 and p;0,000 < 0, 05 ), R/E significantly influenced (Tstat; -5,107 > T-tab;-1, 67 and p;0,000 < 0, 05), only asset structures variable not significantly influenced and. Partially, Capital structures EPS variable

significantly influenced the EPS(T-stat;-9,775 > T-tab;1, 67 and p;0,000 < 0, 05 ); whereas. (2) Only the ROE and R/E significantly and dominantly influenced the capital structure. .
Keywords : Asset structures, ROE, R/E, Capital Structures and EPS

ABSTRAK
Permodalan adalah kebutuhan yang paling mendasar diperlukan perushaan untuk memulai bisnis mereka bahkan memeperluasnya-dikenal perusahaan harus sebagai lebih globalisasi. Untuk menghadapai globalisasi,

memperhatikan masalah pendanaan yang berfokus kepada strucktur permodalan karena permodalan berdampak kepada kemampuan perusahaan untuk bertahan dan berkompetisi dengan perusahaan lain (perusahaan dengan modal kuat dapat membunuh perusahaan dengan modal lemah). Ini sangat penting bagi perusahaan untuk membuat keputusan pendanaanyaitu keputusan terhadap struktur permodalan, adalah pilihan untuk menentukan antara pendanaan menggunakan hutang atau dengan modal sendiri. Proporsi yang tepat terhadap penggunaan hutang dan modal sendiri akan mengantar perusahaan tersebut mendapatkan struktur permodalan yang optimal. Beberapa permasalahan penting harus diaplikasikan dalam menentukan struktur modal yang optimal. Tujuan dari penelitian ini adalah: (1) untuk mengetahui pengaruh structure asset, ROE dan R/E terhadap struktur permodalan dan pengaruh struktur permodalan itu sendiri terhadap EPS, (2) untuk mengetahui, variabel mana yang paling berpengaruh dominan terhadap struktur permodalan. Seratur lima pulih lima perusahaan manufaktur yang go public di BEj digunakan sebagai populasi, dan hanya delapan puluh empat perusahaan digunakan sebagai sample dengan menggunakan metode purposive random sampling. Recursive model of the linear regression, yang digunakan untuk menganalisa persamaan, terbagi menjadi dua langkah; (1) meregresi struktur asset, ROE dan R/E sebagai variable bebas terhadap struktur permodalan sebagai variable terikat, (2) meregresis struktur permodalan sebagai variable bebas terhadap EPS sebagai variable terikat Berdasarkan tujuan dari penelitian, hasil analisis menunjukkan bahwa: (1) secara simultan, tiga variable berpengaruh significan terhadap struktur permodalan (F-stat; 1955, 066 > F-tab;2,37 and p;0,000 < 0,05); dimana, secara parsial, ROE berpengaruh signifikan (T-stat;30,770 > T-tab ;1, 67 and p;0,000 <

0, 05 ), R/E berpengaruh signifikan (T-stat; -5,107 > T-tab;-1, 67 and p;0,000 < 0, 05), hanya struktur asset yang tidak berpengaruh signifikan, dan, secara parsial, struktur permodalan berpengaruh signifikan terhadap EPS (T-stat;-9,775 > Ttab;1, 67 and p;0,000 < 0, 05 ); dimana. (2) Hanya ROE dan R/E yang berpengaruh paling signifikan dan dominant terhadap struktur permodalan..

Kata Kunci : Struktur Aset, ROE, R/E, Struktur Perodalan dan EPS

CHAPTER I INTRODUCTION

1.1`Study Background In starting business, a new firm requires capital, and still more capital is need as if the firm is to expand. Market globalization seen by firms as an opportunity to expand, they can market their products through out their own countries. Market globalization gives a problem, that strong (in financially) industries can kill the small (in financially) industries at the place where they market their products. Many firms concentrate more on financing problem to face this kind of problem. Financing require fund and it can come from many different sources and take many different forms. All capital classified into two basic types-debts and equity which in the use one or both of them, gives advantages and disadvantages. Generally, firms have a tendency to use their internal sources (equity, retained earning, etc) as permanent capital and the external sources such as debt, used by firms as complementary capital. As if a firm had deficit in their internal resources (equity, R/E, etc), it is considered that firms use the external resources (debt) as financing optional. Based on those reasons, financial managers concern on both cost of capital and the choice on capital structure, to determine from where the financing used by firms came from. Financial managers are responsible for firms financing decisions making. Financial manager should look for an efficient financing,

and concerned on the best financing mix or best capital structure (best composition the use of debt financing or equity financing) determination. The best financing mix or capital structure determination has an understanding that capital structure decisions making are able to maximize the value of firms. At the optimal level of capital structure, amount of debt used by firms are able to minimize over all weighted average capital cost (WACC) then the value of firms will be maximized (Martono and D. Agus.H ; pg 239). It is a difficult task to determine their precise optimal capital structure, so a manager should apply judgemental issues in their quantitative analysis for determining the financing resources used before determining the optimal level of capital structure. Some of important judgemental issues taken consider to an optimal capital structure are: 1.Control, majority control of manager has an effect on the choice of debt use or stock published that are going used for their capital structure. 2.Business risk, a higher or lower business risk caused by the increasing or decreasing such as sales variability, operating leverage and other factors effect the amount of debt use. 3.Asset structure, suitability of firms asset structure effect the amount of debt used. 4.Growth rate, movement of firms growth has an effect on the amount of debt used. 5.Profitability (ROE), a higher or lower of firms capability to earn profit using their own equity (known as ROE) effect the tendency in debt used.

6.Taxes, the benefit of tax deductible a firm will get, will influence the choice on amount of debt used. 7.Market condition, conditions in the stock and bond markets undergoes both long-and short-run changes that can affect firms optimal capital structure. 8.Retained earning, a firm choice whether to retain their profit earning or to use their profit earning for dividend payment, will influence the amount of debt used. After determining financing resources came from for capital structure, then the optimal level of capital structure determination needed to identify the effect of financing resources choice in capital structure for firms. The optimal level of capital structure determination could analyze through: 1.EBIT or EPS Analysis, the optimal capital structure analyzed by examining how the changing of debt proportion uses affects its EPS. 2.EPS Indifference Analysis 3.The Effect of Capital Structures on Stock Price and Cost of Capital, the optimal capital structure analyzed through the determination of the mix of debt and equity that maximizes the value of the firm that is, its stock price (not the firms EPS). Further researches were needed, so firms financial manager able to make their financing decision (about choice and proportion of debt or equity used) consider on the optimal level of capital structure. Based on that, the writer

need to make research with the topic: Analysis an Asset Structure, ROE and R/E Influence on Capital Structure and Its Influence toward EPS.

1.2 Problem Identification From the explanation mentioned before, the problem identification can be identified as: 1.Is there any significant influence of asset structure, ROE, and retained earning to capital structure and then, is there any significant influence of capital structure to Earning Per Share (EPS)? 2.How is the influence of Assets Structure, ROE and Retained Earning to the capital structure? 3.What is the variable that is dominantly influence the capital structure? 4.How is the influence of capital structure to EPS?

1.3 Problem Formulation Based on the study background mentioned before, the problem formulation can be formulated become: 1.Is there any significant influence between asset structures to capital structure at manufacturing companies listed at Jakarta Stock Exchange? 2.Is there any significant influence between, ROE to capital structure at manufacturing companies listed at Jakarta Stock Exchange? 3.Is there any significant influence between retained earning to capital structure at manufacturing companies listed at Jakarta Stock Exchange?

4.Is there any significant influence capital structure to EPS at manufacturing companies listed at Jakarta Stock Exchange? 5.Which from three variables (asset structure, ROE and R/E) that dominated influence to firms capital structure at manufacturing industries published at Jakarta Stock Exchange?

1.4 Limitation Of Research Area To analyse the problem observed by the researcher, the limitation of my research are: 1.Stock Exchange observed is only for Jakarta Stock Exchange, because JSE is not only the first stock exchange in Indonesia but also the biggest stock exchange in Indonesia. 2.During observation period, firms that become research object proved listed and sold their stocks at Jakarta Stock Exchange. 3.Observation period use in this research is from January 2000 until December 2003, because during that period is the time where the condition of our country is raising up from crisis. 4.Firms stocks chosen for this research are stocks from manufacturing industries and during research observation period, those stocks already listed at Jakarta Stock Exchange. 5.Companies chosen is companies with the listing date before and till December,31,1997

1.5 Research Objective The objectives of this research are: 1.To recognize the firms financing resources choice used for its capital structure by figure out the influence and significance of asset structure, ROE and R/E to capital structure. 2.To find out which from three variables (asset structure, ROE and R/E) that influence dominantly to capital structure, because it will effect on the choice of financing resources used for its capital structure. 3.To describe the effect of financing resources choice for firms capital structure to its value by figure out the influence and significances of capital structure to EPS. . 1.6 Research Contribution This research can be useful as additional references and a consideration for firms financial manager in the choice of financing resources used for its capital structure, because the financing resources used for its capital structure will effect on the optimal capital structure (a capital structure that able to minimize weighted average cost of capital/WACC and maximize the firms value).

1.7 Definition of Terms In this research, the writer wants to figure out the influence of independent variables to the dependent variables. In this research the variables used are:

1.Capital Structure (Y1), define as firms long-term financing which is shown by the comparison between debts use to equity use. Capital structure reflects the capital sources and proportion use by firms for financing its activity. 2.EPS (Y2) define as earning that can be earned by firms for each share being sold. EPS measured by (net profit-dividend stock-dividend preferred stock) divide by average rate stock published. 3.Asset Structure (X1) consists of current/fixed assets, investments, and other. A firm, whose asset is suitable as security for loans, tends to use debt. In this research, the asset structure variable measured from the average of average of fixed assets divide by total asset 4.Return on Equity-ROE (X2), define as firms capability to earn profit using their own equity where profit shared is profit for stockholder (Earning After Tax). ROE is as the measurement of income for stockholder for their capital invested in firm and it measure firm capability to earn profit for stockholder (Lukman, 1998; R.Agus, 1998). 5.Retained Earning (X3), Retained earning is the measurement amount of earning that retained in percentage form and can be figure out by using formula ( 1-c ) where c is percentage of earning that were divide.

1.8 Writing Structure To make easier in understanding of thesis writing, writing structure needed. The discussion of this thesis divided into 5 chapters. Those five chapters are: CHAPTER I INTRODUCTION This chapter explains Study background, Problem

Identification, Problem formulation, Limitation of research Area, Research Objectives, Research Contribution, and Writing Structure. CHAPTER II REVIEW RELATED LITERATURE This chapter explains few things as a way to get close to theoretic research problem that are going to be tested the truth. This chapter involves Theoretical review (Functions of Finance, The Choices in Financing, Understanding Financial Structure, Understanding Capital Structure, Maximizing Value of Firms), Review Previous Research Theoretical Framework, and Hypothesis Formulation. CHAPTER III RESEARCH METHOD This chapter involves Type of Research Method, Research Subject, Research Setting, Research Instrument, Research Variables, Research Procedure, and Technique Data Analysis.

CHAPTER IV RESEARCH FINDINGS, DISCUSSION, AND IMPLICATIONS This chapter involves Research Description, General Condition of Capital Structure and Return on Equity, Research Analysis (first and second step of analysis), Research Findings (first and second analysis) and Research Implications.

CHAPTER V CONCLUSION AND RECOMMENDATION This chapter consists of two sub chapter that is Conclusion and Recommendation, which contains of the main problem that already analyzed in this research.

CHAPTER II REVIEW RELATED LITERATURE

2.1 Theoretical Review 2.1.1 Functions of Finance Firms ability to survive depend on its operational activity, its profitability where all supported by a good financial management. That is the basic reason why financial manager is an important instrumental to companies succeed, because they involved in decision-making. Based on the function of finance, the major decisional systems separated into three parts where firms should make, those are: 1. The Investment Decisions Investment decisions includes capital investment (that the allocation of capital to investment proposals whose benefit realized in the future.) and reallocate capital (occur when an asset no longer economically justifies the capital committed to it.). The investment decisions determine the total amount of assets held by the firm, the composition of those assets, and the business-risk complexion of the firm as perceived by suppliers of capital. In selecting new investment, a company must manage existing of asset efficiently. 2. The Financing Decisions In financing decisions, the financial manager concerned with the best financing mix or capital structure between debt, equity and

hybrid securities that minimizes a company's cost of capital determination. The financing mix can simply measured by looking at the proportion of debt in the total financing. This ratio called as debt to capital ratio also known as DER. 3. The Dividend / Share Repurchase Decisions The dividend / share repurchase decision is concern on the amount of cash to distribute to stockholders. There are two methods of distribution: cash dividend and share repurchase. The dividend payout ratio and the number of shares repurchased determine the amount of earnings retained in a company and going evaluated in light of the objective of maximizing shareholder wealth. Those three major decisional systems related and influenced to each other. The problems face by firms effect on the decision-making systems made by firms, for an example, firms with the capital structure problems concern on the financing decision, because this decision will help financial manager to determine the capitals sources and proportion that will be used by firms. 2.1.2 The Choices in Financing Decision Financial manager who involved in financing decision-making should choose and look for the best financings sources proportion and concerned also with determining best capital structure. As if a mistake made on financing decision-making, it will fatally effect on firms ability to survive.

There are two basic types of capital as an optional for firms to make their choices for financing decision-making. Those two basic types of capital are: 1. Debt Sources for Financing The essence of debt is that firms promise to make fixed payments in the future (that is interest payments and repaying principal.). As if firms fail on payments, a firm can lose it control on its business. Debt take in different forms, are bank loans (commonly choose by private business.) and bonds-is a debt instrument issued by corporation in order to raise working capital (commonly choose by publicly traded firms). To measure how much the debt proportion used is by looking at the proportion of debt in the total financing. DER-Debt to Equity Ratio that stated in every firms financial statements reflects the proportion of debt used by firms. Where DER formulated as:

Total Debt Debt to Equity ratio = Total Equity The use debt as resources for firms financing should considered for the following characteristic: a. Firms committed to makes fixed payments in the future. b.The fixed payment is tax deductible for firms that choose to use debt financing.

c. Failure to make payments can lead to either default or lose of control of the firm to the party to whom payments are due. The choice in debt use for financing will give not only several advantages but also can existed several disadvantages for its using. Several advantages in the debt use for financing are: a. Interest payment is firms tax deductible (Tax beneficially) The use of debt allowed firms to deduct interest expense from income to arrive at taxable income that it will reduce firms taxes, the higher the marginal tax rate of a business, the more debt it will have in capital structure. b.Add discipline to management Manager of a firm with no debt and generate high income and cash flow attempt to become complacent where it will lead to inefficiency and investment poor project. The use of debt makes managers have to ensure that the investment they make will earn at least enough return to cover interest expenses. c. Debt-holders limitations Debt-holders are limited to a fixed return, so stockholders do not have to share profits if the business does exceptionally well. Debt-holders do not have voting rights, so stockholders can control business with less money than would otherwise required.

There are several disadvantages that should used by financial manager as basic consideration in the choice to use debt or not to use for its financing. Those several disadvantages are: a. Bankruptcy Costs The increasing in the use of debt, it increases the probability bankruptcy and hence the expected bankruptcy cost. The greater probability of bankruptcy in the operating cash flow of the firm, the less debt the firm can afford to use. b.Agency costs Agency cost arises when a firm hire outside parties to do something for the firm, because firm interest may deviate from those outside parties hired. The greater agency problems associated lending to a firm the less debt a firm can afford to use. c. Loss of future flexibility As if a firm borrows up to the capacity, it loses the flexibility of financing structure projects with debt. The more uncertain a firm is about its future financing requirements and projects, the less debt the firm will use for financing current project. 2. Equity Sources for Financing Equity describe as shares issued by a company representing ownership in that company. Equity is amount of cash flows left over

after debt payments had been make. There are several different forms of equity can be taking: a. A very small businesses: owner investing for their investment b.Slightly larger businesses: a venture capital c. Publicity traded firms: common stocks. The important in financing concept is sourcing and used of fund problems, where fund sourcing can come from internal and external resources and going to be used or allocated on firm assets. 2.1.3 The Understanding of Capital Structure The right hand side of firms financial structure reflects firms capital structure that focused only on permanent financing-consist of long-term financing, preferred stock and shareholder equity, where firms should determine the choice and proportion of internal or external financing resources are going to be used. Martono and Harjito, D.Agus (239; 241) define capital structure as the comparison of long-term financing which reflected by the comparison between long-term liabilities to owners equity. The owners equity sources itself come from shareholder equity, and retained earning. Financial manager should look for an efficient financing alternative that occur as if firms has an optimal capital structure. Before determining the optimal level of capital structure, it need to analyze several judgemental issues consider on choice for financing. Some of important judgemental issues taken consider to an optimal capital structure are:

1.Managements Control Position Managements control position may influence the capital structure decision in the choice of debt or equity use, as if management barely has majority control (over 50% of the stock) but not in position to buy any more stock, debt may as the choice for new financing. 2.Business Risk Business risk is a function of the uncertainty inherent in projections of a firms future return on invested capital-ROIC or the risk ness of the firms stock if it uses no debt. A higher-lower level of business risk effect on the proportion of debt used, a firm that has relatively low business risk (small sales variability, low operating leverage, etc) can take more debt then the firm with high business risk. 3.Asset Structure Asset structures suitability effects on the choice and proportion debt used in capital structure. A firm, which asset is suitable as security for loans, tends to use debt rather heavily. K.H, Kee (1993) found that firms with a bigger number of asset structure have a tendency to use a bigger long-term debt too because they use their asset as security for loans. 4.Level of Growth Rate A firms growth movement effect on the choice of the internal and external fund resources optional. A firm with a vastly growth, often

face a bigger uncertainty, then firm have a tendency to reduce their willingness in the debt used. 5.Return on Equity-ROE. ROE is firms capability to earn profit using their own equity. It mean that ROE is contrast to the decision on the debt proportion used by firms, a firm with very high ROE use relatively little debt, because a high level of ROE mean a highly profitable firms that do not need to do much in debt financing where their higher profit enable them to do most their financing. 6.Taxes A firm that use debt should make a fixed interest payment. The interest payments are a deductible expense, while dividends are not, therefore, the higher a firms corporate tax rate, the greater the advantage using debt. 7.Market condition Conditions in the stock and bond markets undergo both long-and short-run changes that can affect firms optimal capital structure. 8.Retained Earning-R/E R/E is the measurement amount of earning that retained in percentage form. A firm that choose to retained their profit earn the capabilities to form their internal fund (equity) is bigger, mean that firms have a tendency to use internal fund resources rather using debt.

R. Agus (1998) argue that as if a firm choose to retained their profit earn, so the capabilities to form internal fund (equity) is bigger, Bambang (1995) stated that one of important manager functions is to determine net profit after tax allocation for one side and for retained earning in the other side where the decision influence the firm value. An important concept in capital structure is Leverage (use of assets and fund resources for increasing shareholder value or profit). The beneficial using Leverage, that the interest payment by firm is cost that tax deductible. so number of total funds for paying shareholder is much bigger as if firm use debt. The beneficial using debt for firm is Tax, because the interest debt payment is a tax deductible or tax saving, the higher firms debt tax, the higher beneficial in using debt (R. Agus, 1994;.Horne 1995) Modligani and Miller (MM) stated that as If theres tax, the capital structure changes become relevant, this because the interest payment function as tax deductible, so for firms use debt can get tax saving and will increasing the shareholder value then the value of firm will maximized. From explanation above can be concluded that firms who use debt will get tax saving, so firms tend to use external fund resources (Debt) bigger, where it will influence the capital structure, because tax saving will increase Earning After Tax (EAT). 2.1.4 The Optimal Capital Structure Determination After knowing which fund resources used for capital structure, the further step could be taken is to determine whether the choice of fund resources for capital structure is optimal. At optimal capital structure, the combination of debt and equity maximized the value of firm because

overall weighted average cost of capital-WACC minimized. There are three analyses could be done to determine the optimal capital structure, are: 1.EBIT or EPS Analysis The capital structure examining through how changing the proportion of debt firms use affects firms Earning Per Share (EPS) 2.EPS Indifference Analysis If firms wants to decide between two capital structures (all equity and 50% debt), then the financial manager want to know at what levels of sales it is better to be an all equity or better to be financed with 50% debt, these can be made by graphing EPS for both financing plans at various level of sales. 3.The Effect of Capital Structure on Stock Prices and Cost of Capital An optimal capital structure reached through the determination mix of debt and equity that able to maximize value of firms-that is stock price-not the EPS. The proportion of debt (in optimal capital structure) will be less than the proportion of debt needed to maximize EPS (because the market valuation of stock considers the risk associated with firms operation expected well into the future where EPS based on it).

In this research, the analysis of an optimal capital structure focus on the use of Earning Per Share-EPS Analysis to determine the optimal capital structure. The changes in the use of debt affect the changes in Earning Per Share (EPS) and then will cause the changes in stock price. As if there are two firms that earn same profit level where one of them use debt and the other one do not use, than tax income payment is not same, because firm that use debt will pay smaller tax (Horne, 1995; Sutrisno, 2000) Stated before, firms that use debt will have small net income, because firms have to pay interest debt, but they will pay smaller tax, it means firms get tax saving. When firms use no debt, they have to pay bigger tax, it mean there is no tax saving they can get. Even though it is difficult to stated precise level of an optimal capital structure, the basic concept to determine whether the choice of debt and equity used for capital structure is optimal that the proportion of debt used followed by the increasing of earning per shareEPS level. The proportion of debt used followed by the increasing of EPS level because when firm use amount of debt as firms capital structure, they have to make fixed interest payment, at other side, the interest payment is tax deductible or it make firm to pay a smaller tax. It should be remained that made a correct amount of debt proportion used followed by the increasing of EPS level, and when incorrect amount debt used, it might be followed by the decreasing of EPS level as if other variables do not influence. Earning Per Share formulated as:

(Sales Fixed Cost Variable Cost Interest) (1 Tax) EPS = Number Shares published or simplify as follows ; (EBIT - 1) (1 T) EPS = Number shares published

2.2 Theoretical Framework Based on the theory brief explained at theoretical review, the framework of this research are
Three Major Decisional Systems

Investment decision

Financing decision

Dividend / Share repurchase decisions

Debt Financing

Equity Financing

Financial Structure (right hand side) Capital Structure (Y1)

Asset Structure (X1)

ROE (X2)

Retain Earning (X3)

Earning Per Share-EPS (Y2)

Optimal Capital Structure

GRAPH.I

Description: In this thesis concern on one of three financial manager decisional systems, that is financing decision and there only two ways of financing a firm can choose that is the use of debt financing or equity financing or used both of them. Financial structure involved all account. The composition between debt and equity used to finance firms asset is part of firms financial structure. The proportion of debt and equity used by firms specifically can be seen at the right hand side of firms financial structure that is through firms capital structure, which reflected the comparison between debt to equity used by firms (DER-debt to equity ratio) Firms capital structure should be the one that can minimize the WACC so it can maximize firms value and it could be reached at an optimal capital structure. Before determining the optimal capital structure, first it need to analyze several judgemental issues relate to capital structure to identify the proportion debt used by firms. Some of judgemental issues taken in to this research are firms asset structure (X1), return on equity-ROE (X2), and retained earning-R/E (X3). After knowing which fund resources a firms tend to use, then analyze continued to figure out its optimal capital structure using one of three ways of analysis that is earning per share-EPS analysis where an optimal capital structure examining through how changing the proportion of debt firms use affects firms earning per share-EPS (Y2). It is difficult task to determine the

precise of optimal capital structure level, but to identify whether the choice and proportion of debt used by firms for its capital structure is optimal or not , that the proportion of debt used by firms followed by the increasing of earning per share-EPS level.

2.3 Review Previous research Review of previous research used a literature to develop the research for the future need. Several of previous researches used for this research are: 1 From the Nunung, Goniyahs analysis (1997) about the capital structure influence to ROE and earning per share at food and beverages industries listed at Jakarta Stock Exchange, it stated that: a. Capital structures positively and influence significantly to ROE. b.Capital structure positively and influence significantly to ROE because ROA is greater that Interest debt. 2 From the Maryam, Zanariahs analysis (1998) about variables

influenced capital structure and its influence toward ROE at metal product industry listed at Jakarta stock exchange, it stated that a. Debt Tax negatively and influence significantly to financing structure b.Leverage has positive and influence significant to ROE c. Interest debt does not influence significantly to ROE. d.ROA positively and influence significantly to ROE.

3 From the La Masidonda, Jaelani; Maski Ghozali; Idrus, M.Ss analysis (2000) about variables influence capital structure and its influence with interest debt and ROA toward to ROE at manufacturing industries listed at Jakarta Stock Exchange, it stated that: a. Asset structures positively and influence significantly to capital structures that as if other variables remain constant, every 1% change of asset structure variables, increase capital structure variable for 49, 0492%. It shown that asset structures changes followed by same direction of capital structures components b.Sales growth negatively and influence significantly to capital structures that as if other variables remain constant, every 1% change of sales growth variables, decrease capital structure variable for 86, 9861%. It shown that to achieve specific level of sales, total assets needed not balanced with the increasing of capital structure variables. c. Firm size negatively and influence significantly to capital structures that as if other variables remain constant, every 1% change of firm size variables, decrease capital structure variable for 38, 7863%. It occurs because the bigger the firms size, the more tendency to decrease the capital structure components especially on the debt used. d.Burden tax positively and influence significantly to capital structures that as if other variables remain constant, every 1% change of burden

tax variables, increase capital structure variable for 62, 7239%. It shown that burden tax becomes a consideration for management in their way to get tax saving from leverage level of return. e. Retained earning positively but not influence significantly to capital structures. It shown that firm tend to make dividend payment to increase stock price for increasing firms value also. f. Capital structures positively and influence significantly to ROE that as if other variables remain constant, every 1% change of capital structures variables, increase ROE variable for 29, 4399%. It shown that, as if the firms external capital increased, the firms ability to earn profit using their internal capital also increased. g.Burden tax positively and influence significantly to ROE that as if other variables remain constant, every 1% change of burden tax variables will increase ROE variable for 1, 4110%. It is shown that, when the interest levels increase, firms tend to use their own internal equity. With a condition that ROE is smaller than interest level. h.ROA positively and influence significantly to ROE that as if other variables remain constant, every 1% change of ROA variables will increase ROE variable for 95, 3678%. It shown that, firms ROA is bigger than interest debt, by debt financing, firms able to increase their ROE level so the firms value can also be increased

4 From the Okky, Andys analysis (2004) about variables influence capital structure at manufacturing industries listed at Jakarta Stock Exchange for period of 2000-2003, it stated that: a. Firm size structures positively and influence significantly to capital structures that as if other variables remain constant, every 1% change of firm size variables, increase capital structure variable for 12, 3%. It shown that even though the bigger the firms size, they tend to increase the debt proportion used. b.Business risk negatively and influence significantly to capital structures that as if other variables remain constant, every 1% change of business risk variables, decrease capital structure variable for10,7%. c. Firm size negatively and influence significantly to capital structures that as if other variables remain constant, every 1% change of firm size variables, decrease capital structure variable for 38, 7863%. It occurs because the bigger the firms size, the more tendency to decrease the capital structure components especially on the debt used. d.Asset structures positively and significantly influence capital structures that as if other variables remain constant, every 1% change of asset structures variables, increase capital structure variable for 2, 328%.

e. Profitability positively but not influence significantly to capital structures. f. Ownership positively and influence significantly to capital structure that as if other variables remain constant, every 1% change of ownership variables, increase capital structure variable for 1, 650%.

2.4 Hypothesis Formulation Hypothesis is temporary answer that still need to be proving its correctness, and needed to give direction to the writer about what are going to be done. Based on the theoretical framework above, the hypotheses for this research are as follows: 1.Asset structure (X1), return on equity / ROE (X2), and retained earning (X3) simultaneously and positively influence capital structure (Y1) at manufacturing industries listed at Jakarta Stock Exchange. 2.Asset structure (X1) partially and positively influence capital structure (Y1) at manufacturing industries listed at Jakarta Stock Exchange. 3.ROE (X2), partially and negatively influence capital structure (Y1) at manufacturing industries listed at Jakarta Stock Exchange. 4.Retained earning (X3) partially and negatively influence capital structure (Y1) at manufacturing industries listed at Jakarta Stock Exchange. 5.Capital structure (Y1) simultaneously and positively influence EPS (Y2) at manufacturing industries listed at Jakarta Stock Exchange.

6.Capital structure (Y1) partially and positively influence EPS (Y2) at manufacturing industries listed at Jakarta Stock Exchange.

CHAPTER III RESEARCH METHOD

3.1 Type Research Method

The study method applied in this research is quantitative descriptive study. This approach was choosing because the research object has real and concrete performance.

3.2 Research Subject 3.2.1 Population and Sample Population for this research are industries / companies that were listed ( go public ) at Jakarta Stock Exchange from year 2000 until 2003 for 323 companies, using purposive random sampling (one of sampling technique non probabilistic taken based on research purpose and the writer consideration criteria) sample taken is 84 manufacturing companies, with the description in table below
Table I.: Sampling Using: Purposive Random Sampling Companies listed at BEJ Non-Manufacturing Companies Manufacturing Companies Companies listing after Dec,311997 Companies not listing Data error Sample taken 323 companies (168) 155 ( 37) ( 10) ( 24) 84 companies

Data being used is secondary data that were published by government, private or other organization ( such As Jakarta Stock Exchange ) in form of research report, science journals, magazine, Indonesia Capital Market Directory ( especially for capital structure and other literature that contain the development of manufacturing industries.). Data gathered using documentation technique with pooled data type, by this type, amount of observation is 252 cases that get from number of year (3) observed multiply by number of sample (84).

3.3 Research Setting The research taken place at Jakarta Stock Exchange, because Jakarta Stock Exchange as one of the biggest go public firm stock selling in Indonesia.

3.4 Research Instrument The hypotheses tested using Multiple Linear Regression with Recursive Model. This model was choosing because this research set to identify the significant of independent variable influence to two dependent variables that were recursively analyse. Recursive model for this analysis for this research formulated as follows: Y1 = 10 + 11X1 + 12X2 + 13X3 + 1t Y2 = 20 + 21Y1 + 2t

Where: Y1, Y2 10, 20 X1, X2, X3 11, 12, 13, 21 1t, 2t = dependent variables = Intercept = Independent variables = coefficient regression = error term

3.5 Research Variables In this research, the writer figure out the influence of independent variables to the dependent variables. In this research the variables used are: 1 Dependent variables Variables influence by independent variables. In this research, variables that become dependent variables are: a. Capital Structure (Y1), proportion debt-equity use by firms. In this thesis, capital structure identify through debt-equity ratio (DER). b.EPS (Y2), is Earning Per Share. In this research, EPS variable took from financial ratios in firms financial statements (or EPS-ratio). 2 Independent Variables Variables that predicted have influence to the dependent variables. In this research, variables that become independent variables are: a. Asset Structure (X1), in this thesis, asset structure identify through the average of fixed assets with total assets. Asset structure can be

figure out through the comparison between fixed asset divide by total asset b.ROE-Return On Equity (X2), define as firms capability to earn profit using their own equity, also known as the equity rentability In this thesis, ROE variable took from financial ratios side in firms financial statements (or ROE-ratio) c. Retained Earning (X3), retained earning is the measurement amount of earning that retained in percentage form and can be figure out by using formula ( 1-c ) where c is percentage of earning that were divide. In this thesis, R/E variable took from Shareholders equity side in firms financial statements ( or R/E ratio).

3.6 Research Procedure Procedures for this research involve: 1.Gathering data from firms financial statements stated in Indonesian capital Market directory 2003 and other literature that support for this research. 2.Stocks for this research are stocks of manufacturing companies listed at Jakarta Stock Exchange for period started at January 2000 until December 2003. 3.After data gathered, data tabulated to make easier in data processing. 4.Data analysis use statistical analysis and interpretation. Data analysed match to the methodological for this research.

3.7 Technique Data Analysis Step taken to analysis the regression are as follows: 1.Regress between dependent variable (Y1)-Capital Structure with independent variables (X1, X2, and X3) Asset Structure, ROE, and Retained Earning. a. Test the influence independent variables simultaneously (F-test): F-test used to figure how far independent variable together influence dependent variable. Step taken to analysis hypothesis testing to value variation of dependent variable explained by value variation of dependent variable as follows: (1). Determining Hypothesis Ho: b1, b2, b3 = 0, There is no significant influence Asset Structure, ROE, and Retained Earning to capital structure Ha; b1, b2, b3 0, There is significant influence Asset Structure, ROE and Retained Earning to capital structure (2). Determining F-table, with 5% significant level (3). Determine F-Statistic r2 ( n 1 k ) F statistic = (4). Decision making criteria If; F Statistic > F table, reject Ho If; F statistic < F table, Ho accepted ( Algifari 1997, 59 ) K ( 1 r2 )

(5). Accepted / rejected area

(6). Determining Conclusion b.Test to the coefficient regression ( T-Test ) This test is to find out how far the significant each of independent variables to dependent variables. In this test involve several steps, those are: (1). Determining Hypothesis for each variables : (a). Ho; b1 = 0, there is no influence of asset structure to capital structure Ha; b1 0, there is influence of asset structure to capital structure (b). Ho; b2 = 0, there is no influence ROE to capital structure Ha; b2 0, there is influence ROE to capital structure (c). Ho; b4 = 0, there is no influence of retained earning to capital structure Ha; b4 0, there is influence of retained earning to capital structure (2). Determining T table, with 5% significant level

(3). Determining T statistic using formula r T statistic = Where T statistic = statistic test r n k = product prouct moment coefficient = number of sample = number of variable X n1k 1 r2

(4). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted (5). Accepted / rejected area

(6). Determining Conclusion c. Measurement Percentage influence all independent variables Percentage influence of all independent variables to dependent variable can be figure out through determinant coefficient ( R squared / R2 ). The number of coefficient determination come from 0 until 1, close to 0 it mean : smaller the influence of all independent

variables to dependent variable and close to 1 mean : bigger influence of independent variables to dependent variable. d.Classical Assumption Test In theoretically, model used in this research will result a good parameter value of hypothesis model as if already acquired for the classical assumption those are multicollinearity, heteroscedasticity, and auto correlation. (Santoso, 2000; 30) (1). Multicollinearity Test to figure out whether in regression, there is a correlation between independent variable, as if there were a correlation so there will be a multi co linearity problem. Multicollinearity use to find out the perfect linear relationship of neither some nor all independent variables inside of regression model used. As if the level of correlation < 90 %, so there is no multicollinearity problems. (2). AutoCorrelation Auto correlation use to find out whether there is a correlation between sample yang diurutkan based on time. The consequences of the auto correlation existences inside of regression model is the sample variance could not describe populations variance, so the regression model can not use to predict dependent variable value at independent variable value.

As if correlation exists, so the autocorrelation problems exist. A good model is a regression model that free from autocorrelation problems. Autocorrelation use to figure out the disturbance of time series data. This detect using DurbinWatson test. (3). Heteroscedasticity Test to figure out whether in regression model the difference variances from one observation residual to another observation occur. As if the variance from one observation residual to another observation occur, so its mean the heteroskedasity occur. Heteroskedasity caused the disturbance mistake in regression model are not same for all independent variable. To find out whether there were a heteroskedasity problem if T-statistic < Ttable or probability value above the level of significance for 5%, so there is no heteroskedasity inside the model. 2.Regress between dependent variable (Y2) earning Per Share / EPS with independent variables ( Y1) Capital Structure a. Test to the coefficient regression ( T-Test ) This test use to find the significant each of independent variable to dependent variable. In this test involve several steps, those are: (1). Determining Hypothesis for each variables :

Ho ; Y1 = 0 , there is no influence capital structure to earning per share Ha ; Y1 0 , there is influence of capital structure to earning per share (2). Determining T table, with 5% significant level (3). Determining T statistic using formula r T statistic = Where T statistic = statistic test r n k = product prouct moment coefficient = number of sample = number of variable X n1k 1 r2

(4). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted (5). accepted / rejected area

(6). Determining Conclusion

CHAPTER IV RESEARCH FINDINGS, DISCUSSION, AND IMPLICATIONS

4.1 Research Description In this research, data analyzed using multiple linear regression analysis with recursive model. This model chosen because this research set to identify the significant of independent variable influence to two dependent variables that were recursively analyse that is to figure out the influence of Assets Structure, ROE and R/E to Capital Structure and its influence toward to EPS. Data analyzed helped using SPSS.11 version. 323 companies listed at Jakarta Stock Exchange from January 2000 until December 2003 are the population for this research. 84 samples taken using purposive random sampling (sampling technique non-probabilistic taken based on research purpose and the writer consideration criteria). Some criteria used are classification of manufacturing and non-manufacturing companies, listing date and data error. Data gathered using documentation method (data gathered from firms prospectus and other literature support for this research) and data take from Jakarta Stock exchange at Islamic University of Indonesia. Then data tabulated to make easier in data processing.

4.2 Research Analysis 4.2.1 First Step of Analysis The first step of analysis is regress the influence of asset structure, ROE and R/E variables to capital structure variable 1.Quantitative Analysis a.Multiple Linear Regression Multiple Regression line used to find out the relation pattern between two or more variables. The main purpose of this regression analysis is to predict the value of dependent variable as if other variable that related to it has already been determined. The first multiple linear regression model for Asset Structure (X1), ROE (X2) and Retained Earning (X3) to Capital Structure (Y1) are as follows : Y1 = 10 + 11X1 + 12X2 + 13X3 + 1t Where: Y1 10 X1 X2 X3 1t = dependent variable- Capital Structure = Intercept = Asset Structure = Return On Equity-ROE = Retained Earning-R/E = error term

The result of regression analysis using SPSS 10.0 version are as follows:
Table II. Regression Analysis of X variables to Y1 variable Variables X1 X2 X3 Intercept Coeff. Regression 0,155 - 6,623 - 7,730 2,688 Stand. Coeff. Beta 0.001 0.973 - 0.038 Sig. t 0,040* 56,001* - 2,189* 1.943*

F. significant = 1369,864 R. squared = 0.982

Where: X1 = Asset Structure X2 = Return On Equity-ROE X3 = Retained Earning-R/E * = Significant at = 0, 05 or at level 5 %

From table above, the multiple linear regressions stated as follow: Y1 = 2.688 + 0.155X1 - 6.623X2 7,730X3 + 1t (1). Coefficient Asset Structure (X1) Asset Structure (X1) has a positive sign of multiple coefficient regression for 0,155. It means, as if the others coefficient multiple regression variables remain constant, the changes of asset structure variable for 1% will increase the capital structure variables for 0,155 (or 15,5%). From analyzed data, the changes of asset structure followed by capital structure increasing. It is show that firms have a bigger amount of asset so they tend to use debt financing. It occurs

because firms might use their asset as debt collateral to get debt financing. In his research, K.H, Kees (1993) stated that firms with a bigger asset structures, have a tendency to use a bigger debt (especially long-term debt) for its financing activity. (2). Coefficient Return On Equity-ROE (X2) Coefficient Return on Equity-ROE (X2) has a negative sign of multiple coefficient regression for -6.623. It means, as if the other coefficient regression value variables remain constant, the changes of Return on Equity-ROE variable for 1% will cause the decreasing of the capital structure variable for 6.623 (or 66,23%). From analyzed data, the ROE changes followed by the capital structure decreasing. It is show that profit earn by firms increased by the equity financing rather than debt financing or in other word, firms tend to use their equity rather debt for its capital structure to finance its activity. (3). Coefficient Retained Earning-R/E (X3) Coefficient Retained Earning (X3) has a negative sign of multiple coefficient regression for -7,730. It mean, as if the others coefficient regression variables remain constant, the changes of Retained Earning (X3) variables for 1% will cause the decreasing of the capital structure variable for 7,730 (or 77,30%).

From analyzed data, the R/E changes followed by the capital structure decreasing. It is show that when the percentage of profit stated as retained profit is bigger, the dividend payout ratio is smaller, and then it will increase their own equity and finally will effect on the capital structure decreasing, because a firm have a tendency to use internal fund resources rather using debt. In his theory, Agus.R (1998) stated that as if a firm choose to retain their profit earning rather use it to pay dividend, then the capabilities to form internal fund (equity) is getting bigger. (4). Constant ( ) Constant is 2.688. It mean that, as if the other variables-asset structure (X1), Return on Equity (X2), and Retained Earning (X3) remain constant or equal to zero, the capital structure will increase for 2,688 or (26,88%).. From analyzed data, as if firms internal sources remain zero (retained earning = 0) and firms capability to earn profit using own equity remain zero (ROE = 0), firm will chose to use their external fund resources (debt financing) as an optional for their operational activity also earn profit. 2.F-Test Analysis a Determining Hypothesis Ho: b1, b2, b3 = 0, There is no significant influence Asset Structure, ROE, and Retained Earning to capital structure

Ha; b1, b2, b3 0, There is significant influence Asset Structure, ROE and Retained Earning to capital structure b Determining F-table, with 5% significant level c Determine F-Statistic r2 ( n 1 k ) F statistic = d Decision making criteria If; F Statistic > F table, reject Ho If; F statistic < F table, Ho accepted ( Algifari 1997, 59 ) e Accepted or rejected area K ( 1 r2 )

Graph.1I

f Determining Conclusion Based on the multiple linear regression result in Table I, can be seen that F - Statistic (1369,864) > F - Table (2,76) and p (0,000) < 0,05. It mean that Ho is rejected and Ha is accepted or in other word that at manufacturing companies ,simultaneously the assets structure, ROE and retained earning variables influence significantly to capital structure.

3.T-Test Analysis a Influence Assets Structure (X1) to Capital Structure (Y1) : (1). Determining the hypothesis Ho; b1 = 0, there is no influence of asset structure to capital structure Ha; b1 0, there is influence of asset structure to capital structure (2). Determining T table ( 5%, df = 77) = 1,66 and T statistic = 0,040 (3). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted (4). Accepted or rejected area

Graph.1II

(5). Determining Conclusion Because of T-tab (-1,66) < T-stat (0,040) < T-tab (+ 1,66), and p (0,968) > 0, 05 (5%), it means that Ho is accepted and Ha is rejected or in other word that at manufacturing companies, partially the assets structure variable do not significantly influence to capital structure.

b Influence Return On Equity (X2) to Capital Structure (Y1) (1). Determining the hypothesis Ho; b2 = 0, there is no influence ROE to capital structure Ha; b2 0, there is influence ROE to capital structure (2). Determining T table ( 5%, df = 77) = 1,66 and T statistic = 56,001 (3). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted (4). Accepted or rejected area

Graph.1V

(5). Determining Conclusion Because of T-stat (56,001) > T-tab (1, 66) and p (0,000) < 0, 05 (5%), it means that Ho is rejected and Ha is accepted or in other word that at manufacturing companies , partially the ROE variable influence significantly to capital structure. c Influence Retained Earning (X3) to Capital Structure (Y1) (1). Determining the hypothesis Ho; b4 = 0, there is no influence of retained earning to capital structure

Ha; b4 0, there is influence of retained earning to capital structure (2). Determining T table, ( 5%, df = 68) = 1,66 and T statistic = - 2,189 (3). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted (4). Accepted or rejected area

Graph. V

(5). Determining Conclusion Because of T-stat (-2,189) > T-tab (-1, 67) and p (0,032) < 0, 05 (5%), it means that Ho is rejected and Ha is accepted or in other word that at manufacturing companies , partially the R/E variable influence significantly to capital structure variable. 4.Multiple Linear Correlation a.Correlation Coefficient and coefficient Determinant From Table I, it is show that the value of coefficient determination (R square or R2) is 0.982. It is show that 98,2 % variation of Capital Structure determined by t he existence of asset structure, return on equity (ROE) and retained earning (R/E) and another 0,018 or 1,8 % variation

of capital structure determined by another factors (beside capital structure, ROE and R/E). 5.Classical Assumption Test a Multi-co-linearity Test Using SPSS 11.00 version, the multi-co-linearity test result can be seen in this table below:
Table III Multicolinaerity Test Result Model Constant Assets Structure Return On Equity Retained Earning 0,996 0,792 0,789 1.004 1,263 1,268 Collinearity Statistic Tolerance VIF

Data observed do not contain multi-co-linearity problem as if the value of VIF < 10 and Tolerance value 1<.Based on table II, it can be seen that those three independent variables has the value of VIF < 10, and the tolerance value close or above to 0, 1 so it mean that this regression model do not have any multi-co-linearity problems. b Autocorrelation Test Using SPSS 11.00 version, the autocorrelation test result can be seen in this table below:
Table.IV Autocorrelation Test Analysis Result Model Summary Model 1 R 0,991a R square 0,982 Adjust R Square 0,981 Std Error of the estimate 5,31137 2,013 Durbin-Watson

a : Predictors ; (Constant), Retained Earning, Return On Equity, Asset Structure b: Dependent Variables : Capital Structure

Data observed do not contain auto-correlation problem as if the value of Durbin-Watson < 5. Based on table III, it can be seen that the value of Durbin-Watson is 2,013, so no auto correlation exist for these regression model. c Heteroskedasticity Test Using SPSS 10.00 version, the result of autocorrelation test can see in this table below:
Table V Heteroskedasity Test Analysis Result

Variables X1 X2 X3 Intercept

Coeff. Regression 0,155 - 6,623 - 7,730 2,688

Stand. Coeff. Beta 0.001 0.973 - 0.038

t 0,040* 56,001* - 2,189* 1.943*

Sig 0,968 0,000 0,032 0,056

Data observed do not contain heteroskedasity problem as if level significance of variables is > 0,05. Based on table IV, only asset structure that has level significance > 0, 05 and only return on equity with retained earning variables that have significance < 0,05. To solved this heteroskedasity problem found in retained earning variables is by ignoring this problem). Based on all of classical assumption test, it shows that the regression model used in these research is valid, these show by data used acquired

the normality assumption and there is no multicollinmearity, autocorrelation and heteroskedasity problem, so this regression model deserved to use. 4.2.2 Second Step of Analysis The second step analysis is regress the influence of capital structure variables to earning per share variable 1.Quantitative Analysis a Simple Linear Regression For this second step of analysis, a simple regression linear used to find out relation pattern between one independent variable to one dependent variable. The main purpose of this regression analysis to predict value of dependent variable as if other variable that related to it already determined. The second linear regression model for capital structure (Y1) to Earning Per Share (Y2) are as follows: Y2 = 10 + 11Y1 + 1t Where: Y2 10 Y1 1t = dependent variable- Earning Per Share (EPS) = Intercept = Capital Structure = error term

The result of regression analysis using SPSS 11.0 version are as follows:
Table VI Regression Analysis of Y2 variables to Y1 variable: Variables Y1 Intercept Coeff. Regression 4,443 - 92,593 Stand. Coeff. Beta -6.760 Sig. t - 6,730* 3,592*

F. significant = 45,287 R. squared = 0.367

Where: Y1 = capital structure * = Significant at = 0,05 or at level 5 %

From table above, the multiple linear regressions stated as follow: Y2 = - 92,593 + 4,443Y1 + 1t (1). Coefficient Capital Structure (Y1) Capital structure (Y1) has a positive sign of multiple coefficient regression for 4,443. It means that the changes of capital structure variable for 1% will increase the Earning Per Share variables for 4,443 (or 44,43%). The increasing EPS occur because firms tend to use debt financing rather than equity, as if firms tend to use debt more, they will get what called as tax deductible. Hornes theory (1995) stated that the beneficial in debt used is tax, because interest rate payment is as firms tax deductible and it become beneficial for firm so the earning per share can be much bigger rather the firm neither totally

using equity nor totally published stocks without any consideration using debt. (2). Constant ( ) Constant for - 33,267 mean that when the capital structures (Y1) remain constant or equal to zero, so the earning per share will decrease for 33,267. The firms earning per share decrease because firms do not involved the used of debt where the use of debt will give tax deductible for firms then the value of earning per share become bigger rather using equity totally. 2.T-Test Analysis a Influence Capital structure (Y1) to Earning Per Share (Y2) : (1). Determining the hypothesis Ho; b1 = 0, there is no influence of Capital structure (Y1) to Earning Per Share (Y2) Ha; b1 0, there is influence of Capital structure (Y1) to Earning Per Share (Y2). (2). Determining T table ( 5%, df = 78) = 1,66 T statistic = -6,730. (3). Decision making criteria If; T statistic > T table, Ho reject If; T statistic < T table, Ho accepted

(4). Accepted / rejected area

Graph.VI

(5). Determining Conclusion Because T-stat (-6,730) > T-tab (-1,66), and p (0,000) < 0, 05 (5%), it can be concluded that Ho rejected and Ha accepted, or in other words that there is significant influence of capital structure variable (Y1) to earning per share (Y2). 3.Multiple Linear Correlation a.Correlation Coefficient and coefficient Determinant From Table V shows that the value of coefficient determination (Rsquare / R2) is 0.367 which show that 36,7 % variation of Earning Per Share determined by the existence of capital structure variable. And another 0,633 or 63,3% variation of earning per share determined by another factors (beside capital structure).

4.3 Research Findings 4.3.1 First Step of Analysis Findings In first step of analysis, the writer observed an influence of independent variables (assets structure, return on equity-ROE, and retained earningR/E) to dependent variable (capital structure), then the result of analysis are: 1.Based on F-test of Analysis Based on F-test analysis, found that F-statistic (1369,864) > F-table (2,76) and p (0,000) < 0,05, it means that Ho is rejected and Ha is accepted. At manufacturing companies, simultaneously the independent variablesAssets Structure (X1), Return on Equity (X2) and Retained Earning (X3) significantly influence the dependent variable-Capital Structure (Y1). 2.Based on T-test and Partial Correlation of Analysis a. The T-test of Asset Structure to Capital Structure found that : T-stat (0,040) < T-tab (+1,66), and p (0,968) > 0,05 (5%), it can be concluded that Ho accepted and Ha rejected, or in other words that there is no significant influence of asset structure variable (X1) to capital structure. b.The T-test of Return On Equity to Capital Structure found that : T-stat (56,001) > T-tab (1,66), and p (0,000) < 0,05 (5%), it can be concluded that Ho rejected and Ha accepted or in other words that there is a significant influence of return on equity variable-ROE (X2) to capital structure.

c. The T-test of Retained Earning to Capital Structure found that : T-tab (-2,189) >T-tab (-1, 66), and p (0,032) < 0,05 (5%), it can be concluded that Ho rejected and Ha accepted, or in other words that there is significant influence of retained earning variable-R/E (X3) to capital structure. 4.3.2 Second Step of Analysis Findings In second step of analysis, the writer observed an influence of independent variable (capital structure) to dependent variable (Earning Per Share). The analysis results are: 1.Based on T-test and Partial Correlation of Analysis a. The T-test of Capital Structure to Earning Per Share found that : T-Statistic (-6,730) > T-Table (-1,66), and p (0,000) < 0,05 (5%), it can be concluded that Ho rejected and Ha accepted, or in other words that there is significant influence of capital structure variable (Y1) to Earning Per Share.

4.4 Implications 4.4.1 Capital Structure Asset structure positively and significantly influence to capital structure. This shows that changes of asset structures followed by the capital structure changes. This considered in memorising that the decreasing of asset structure followed by the decreasing capital structure and the increasing asset structure followed also by the increasing of capital structure. Therefore, the debt increasing that directed to the increasing

fixed asset investment, should given an attention on another financing component so the value firms maximized. Return on equity negatively and significantly influence to capital structure. This show that changes of ROE do not follows by the capital structure changes. This considered that there is a tendency using more equity rather debt in their operation to earn profit because by using equity more, the profit come from operating equity much more bigger, then it will increase firms profitability from shareholder point of view, but the use of debt should considered remain to the maximizing firms value. Retained earning has negative and significant influence to capital structure. It also shows that the changes of R/E do not follow by the capital structure changes. This considered that firms tends to retain their earning, so there is a big changes for firm to make their internal resources, then it made firm tend to use equity rather debt. The companies should consider for using debt that will give tax deductible in which will increase the EPS so the value of firms could be maximized. However, when all the independent variables remain constant or zero (asset structure = 0; ROE = 0 and R/E = 0), capital structure variable has a positive sign. It means the debt proportion used is bigger compare to the equity proportion used. Firms tend to use the external fund resources (debt) rather internal fund resources (equity). ROE measure firms capability to earn profit for its shareholder and when ROE remain constant or zero, firms do not consider focus on the

increasing shareholder value using their own equity but tend to use debt as firms financing. When R/E remain constant or zero, it means firms not retain their profit earn to be re-invested then internal fund resources is smaller. Because the internal fund resources is smaller, the firms chose to used external fund resources (debt) for its financing activities 4.4.2 Earning Per Share (EPS) Capital structure has a positive sign parameter and significantly influence to Earning Per Share. This show that the changes capital structure followed by the changes EPS, mean that the proportion debt use by firms able to increase firms EPS, it might be that firms get tax deductible from the interest payment so the value of EPS is bigger rather firms use only or more tends to equity However, when capital structures remain constant or zero, Earning per Share has a negative sign parameter. This show that firms tend to use equity to debt or the proportion debt already used by firm unable to increase the value of earning per share. When the EPS value increases, it is one indication that the capital structure own by firms is optimal or optimal capital structure where the value of firms maximized. Companies should consider for the increasing of capital structure component, especially the financing using debt. The best proportion use between debt and equity might give an increasing the EPS value and firm get benefit from interest payment as firms tax deductible or as their tax saving.

CHAPTER V CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions From analysis result been described in chapter before can give a conclusion as follows: 1 First step regression analysis between independent variable (asset structure-X1, ROE-X2 and Retained Earning-X3) to dependent variable (capital structure-Y1) result : Y1 = 2.688 + 0.155X1 - 6.623X2 7,730X3 + 1t Define that a. Asset Structure (X1) has a positive sign of multiple coefficient regression for 0,155. It means that as if the others coefficient multiple regression variables remain constant (not change), the changes of asset structure variable for 1 % will increase the capital structure variables for 0,155 (or 15,50%). b.Coefficient Return On Equity (X2), has a negative sign of multiple coefficient regression for -6.623, it means that as if the other coefficient regression value variables remain constant, so the changes of return on equity variable for 1% will cause the decreasing of the capital structure for 6.623 (or 66,23%). c. Coefficient Retained Earning (X3) has a negative sign of multiple coefficient regression for -7,730, it means that when the others

coefficient regression variables remain constant, so the changes of Retained Earning (X3) variables for 1 % will cause the decreasing of capital structure for 7,730 (or 77,30%). From those result figured that firms have a tendency using the internal fund resources (equity) rather using external fund resources (debt). It indicated by the increasing ROE where ROE is firms capability to earn profit using equity, and the increasing of R/E where firms have a tendency to retain their earning so the opportunities to make an internal fund resources is bigger. 2 In Table II, can be seen that F - Statistic (1955, 066) > F - Table (2,37) and p (0,000) < 0,05, simultaneously the assets structure, ROE and retained earning variables influence significantly to capital structure. ROE partially influence to capital structure (T-stat;30,770 > T-tab ;1, 67 and p;0,000 < 0, 05 ), and Retained Earning partially influence capital structure (T-stat; 5,107 > T-tab;-1, 67 and p;0,000 < 0, 05) 3 In Table II, show that the value of coefficient determination (R-square or R2) is 0.982 mean 98,2 % variation of Capital Structure determined by the existence of asset structure, return on equity (ROE) and retained earning. And another 0,012 or 1,2% variation of capital structure determined by another factors (beside capital structure, ROE and R/E). 4 Second step regression analysis between independent variable (capital structure-Y1) to dependent variable (Earning Per Share-Y2) result : Y2 = - 33,267 + 3,825Y1 + 1t

a. Capital structure (Y1) has a positive sign of multiple coefficient regression for 4,443. It means that as if the changes of capital structure variable for 1 % will increase the Earning Per Share variables for 4,443 (or 44,43%). From those result figured that based on EPS analysis, firms capital structure not optimal yet because when the capital structure remain constant or zero, EPS decrease for 33,267. It mean that the proportion debt use by firm not able to increase the value of EPS, theres no maximize get from tax deductible get from interest payment by firms. 5 In Table VI,. Capital structure partially influence to EPS (T-stat;-9,775 > T-tab;1, 67 and p;0,000 < 0, 05 ). 6 In Table VI, it show that the value of coefficient determination (R-square / R2) is 0.577 mean 57,7 % variation of EPS determined by the existence of capital structure another 0,423 or 42, 3 % variation of EPS determined by another factors (beside capital structure).

5.2 Recommendation This research result hoped can give recommendation for them who read this research. The contributions they can get are: 1.The owners and Management side Companies should consider for the best proportion between debt equity use so an optimal capital structure reached where WACC minimized and value firms maximized. Companies should consider the use debt rather

equity, because companies will get tax deductible (come from interest payment) so value EPS will increase, companies profitability will increase from shareholder point of view, then the value of firm can be maximized. Companies should consider for variables that influence capital structure, because capital structure will influence the value of EPS then 2.The further research Researcher whom interested further more about capital structures problem and EPS suggest adding another variables the result will more determined the capital structure in the way to increasing the level of EPS. The researcher can be used for another analysis to analyze the optimal capital structure (such as EPS indifference analysis, The effect of capital structures on stock price and cost of capital) so the observation become more accurate.

BIBLIOGRAPHY
Horne, Van, C.J. (1995) Financial Management and Policy, Tenth Edition, Prentice Hall, International Edition, New Jersey. Horne, Van, C.J. (1995) Financial Management and Policy, Twelfth Edition, Prentice Hall, International Edition, Upper Saddle River,New Jersey. Brealy, Richard A. and Steward, C. Myers (1991) Principles of Corporate Finance, Fourth Edition, Richard D.Erwin, Inc. Eugene F, Brigham ; Louis C, Gapenski ; Philip R, Daves ( 2000 ) Intermediate Financial Management, Sixth Edition, Prentice Hall, International Edition, New Jersey.. Eugene f, Brigham ; Joel F, Houston ( 1998 ), Fundamentals Of Financial Management, Eight Edition, The Dryden Press, Harcourt Brace College Gerald I, White ; Ashwinpaul C, Sondhi, Dov, Fried ( 1998 ), The Analysis And Use of Financial Statements, Second Edition, John Wiley & Sons.Inc Subardi Agus ( 1994 ), Manajemen Pendanaan, Jilid 2, first edition, Upp Amp YKPN, Yogjakarta Napa, I.A. dan Mulyadi P.S. (1996) Keputusan Keputusan Pendanaan Perusahaan (Teori dan Hasil Pengujian Empirik), Second edition, Liberty, Yogyakarta R., Agus, Sartono (1998) Manajemen Pendanaan Teori dan Aplikasi, Third edition, BPFE, Yogyakarta. S.Nasution(1996), Metode Research: Penelitian Ilmiah, First edition, Bumi Aksara, Jakarta Alfigari,(1997), Analisis Regresi, First Edition,BPFE, jogjakarta Weston, J.F. and Brigham, U. F. (1994) Dasar- Dasar Manajemen Pendanaan, Seventh edition , Erlangga, Jakarta. Weston, J.F. dan Copland, T.E. (1997) Manajemen Pendanaan, Ninth edition, Bina Rupa Aksara, Jakarta. Maski,Ghozali and Idrus, M.S (1999), Analisis Variabel-Variabel Yang Mempengaruhi Struktur Pendanaan Dan Pengaruhnya Bersama Beban

Bunga, Return On Asset Terhadap Rentabilitas Modal Sendiri Pada Perusahaan Food And Bavarage Yang Go Publik Di Indonesia Periode 1995-1997 , Thesis, Universitas Brawijaya Malang.

APPENDICE

First Step Regression Analysis

b Variables Entered/Removed

Model 1

Variables Entered R/E, Asset structure, a ROE

Variables Removed ,

Method Enter

a. All requested variables entered. b. Dependent Variable: Capital Struct.

Model Summaryb Adjusted R Square ,981 Std. Error of the Estimate 5,31137 Durbin-W atson 2,013

Model 1

R R Square ,991a ,982

a. Predictors: (Constant), R/E, Asset structure, ROE b. Dependent Variable: Capital Struct.

ANOVAb Sum of Squares 115934,2 2172,218 118106,4

Model 1

df 3 77 80

Regression Residual Total

Mean Square 38644,726 28,211

F 1369,864

Sig. ,000a

a. Predictors: (Constant), R/E, Asset structure, ROE b. Dependent Variable: Capital Struct.

Coefficientsa Standardi zed Coefficien ts Beta ,001 ,973 -,038 t 1,943 ,040 56,001 -2,189 Sig. ,056 ,968 ,000 ,032

Unstandardized Coefficients Model 1 (Constant) Asset structure ROE R/E B 2,688 ,115 -6,623E-02 -7,73E-07 Std. Error 1,384 2,878 ,001 ,000

Collinearity Statistics Tolerance ,996 ,792 ,789 VIF 1,004 1,263 1,268

a. Dependent Variable: Capital Struct.

Second Step Regression Analysis

b Variables Entered/Removed

Model 1

Variables Entered Capital a Struct.

Variables Removed ,

Method Enter

a. All requested variables entered. b. Dependent Variable: EPS

Model Summaryb Adjusted R Square ,359 Std. Error of the Estimate 226,8868 Durbin-W atson 1,516

Model 1

R R Square ,606a ,367

a. Predictors: (Constant), Capital Struct. b. Dependent Variable: EPS

ANOVAb Sum of Squares 2331268 4015253 6346521

Model 1

df 1 78 79

Regression Residual Total

Mean Square 2331268,172 51477,604

F 45,287

Sig. ,000a

a. Predictors: (Constant), Capital Struct. b. Dependent Variable: EPS

Coefficientsa Standardi zed Coefficien ts Beta -,606 t 3,592 -6,730 Sig. ,001 ,000

Unstandardized Coefficients Model 1 (Constant) Capital Struct. a. Dependent Variable: EPS B 92,593 4,443 Std. Error 25,776 ,660

Collinearity Statistics Tolerance 1,000 VIF 1,000

TABEL DURBIN WATSON

Level of Significance = 0,05
n 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 45 50 55 60 65 70 75 80 85 90 95 100 p -1=1 dU dL 1.08 1.36 1.10 1.37 1.13 1.38 1.16 1.39 1.20 1.40 1.22 1.41 1.24 1.42 1.26 1.43 1.27 1.44 1.30 1.45 1.32 1.45 1.33 1.46 1.34 1.47 1.35 1.48 1.36 1.48 1.37 1.49 1.38 1.50 1.39 1.50 1.40 1.51 1.41 1.51 1.42 1.52 1.43 1.52 1.44 1.53 1.45 1.54 1.46 1.54 1.47 1.54 1.48 1.57 1.50 1.59 1.53 1.60 1.55 1.62 1.57 1.63 1.58 1.64 1.60 1.65 1.61 1.66 1.62 1.67 1.63 1.68 1.64 1.69 1.65 1.69 p -1= 2 dL dU 0.96 1.54 0.98 1.54 1.02 1.54 1.05 1.53 1.08 1.53 1.10 1.54 1.13 1.54 1.15 1.54 1.17 1.54 1.19 1.55 1.21 1.55 1.22 1.55 1.24 1.56 1.26 1.56 1.27 1.56 1.28 1.57 1.30 1.57 1.31 1.57 1.32 1.50 1.33 1.58 1.34 1.58 1.35 1.59 1.36 1.59 1.37 1.59 1.38 1.60 1.39 1.60 1.43 1.62 1.46 1.63 1.49 1.64 1.51 1.65 1.54 1.66 1.55 1.67 1.57 1.68 1.59 1.69 1.60 1.70 1.61 1.70 1.62 1.71 1.63 1.72 p -1= 3 dL dU 0.82 1.75 0.86 1.73 0.90 1.71 0.93 1.69 0.97 1.68 1.00 1.68 1.03 1.67 1.05 1.66 1.08 1.66 1.10 1.66 1.12 1.66 1.14 1.65 1.16 1.65 1.18 1.65 1.20 1.65 1.21 1.65 1.23 1.65 1.24 1.65 1.26 1.65 1.27 1.65 1.28 1.65 1.29 1.65 1.31 1.65 1.32 1.66 1.33 1.66 1.34 1.66 1.38 1.67 1.42 1.67 1.45 1.68 1.48 1.69 1.50 1.70 1.52 1.70 1.54 1.71 1.56 1.72 1.57 1.72 1.59 1.73 1.60 1.73 1.61 1.74 p -1= 4 dL dU 0.69 1.97 0.74 1.93 0.78 1.90 0.82 1.87 0.86 1.85 0.90 1.83 0.93 1.81 0.96 1.80 0.99 1.79 1.01 1.78 1.04 1.77 1.06 1.76 1.08 1.76 1.10 1.75 1.12 1.74 1.14 1.74 1.16 1.74 1.18 1.73 1.19 1.73 1.21 1.73 1.22 1.73 1.24 1.73 1.25 1.72 1.26 1.72 1.27 1.72 1.29 1.72 1.34 1.72 1.38 1.72 1.41 1.72 1.44 1.73 1.47 1.73 1.49 1.74 1.51 1.74 1.53 1.74 1.55 1.75 1.57 1.75 1.58 1.75 1.59 1.76 p -1= 5 dL dU 0.56 2.21 0.62 2.15 0.67 2.10 0.71 2.06 0.75 2.02 0.79 1.99 0.83 1.96 0.86 1.94 0.90 1.92 0.93 1.90 0.95 1.89 0.98 1.88 1.01 1.86 1.03 1.85 1.05 1.84 1.07 1.83 1.09 1.83 1.11 1.82 1.13 1.81 1.15 1.81 1.16 1.80 1.18 1.80 1.19 1.80 1.21 1.79 1.22 1.79 1.23 1.79 1.29 1.78 1.34 1.77 1.38 1.77 1.41 1.77 1.44 1.77 1.46 1.77 1.49 1.77 1.51 1.77 1.52 1.77 1.54 1.78 1.56 1.78 1.57 1.78

p-1 = Number of independent variables Sumber : Hanke (1998:549)