Does Taxation And Macroeconomics Matter On The Profitability Of Indonesian Banking Sector Through Capital Structure Policy?


Yuli Teguh Hidayat ,

Download Full PDF Pages: 91-98 | Views: 334 | Downloads: 102 | DOI: 10.5281/zenodo.3463839

Volume 5 - January 2016 (01)


This research aims to analysis whether the combination of taxation and macroeconomics will affect the profitability of Indonesian banking sector through capital structure policy. The result is expected to be able to develop alternative models that can be used as a reference for further research related to the increased profitability of banking companies, through tax planning in combination with capital structure decisions. Research on the effect of taxation policy for non-financial institutions have been found so many in the literature, while in the banking sectors are still rare. This study uses econometric models aimed to examine the effect of taxation against banking behaviour associated with the company's capital structure decisions and ultimately reflected in the ability of the company generates profitability. The interaction between taxation and variable macroeconomic conditions are simultaneous testing to test the effect of two variables on the capital structure and profitability of banks. Based on the results of test carried out partially on the impact of taxation and macroeconomics on capital structure showed that sub variable corporate income tax rate, dummy public, GDP, and BI Rate are significant. While, CKPN and Kurs are not significant. The results of test carried out partially on the impact on profitability showed that sub variable Capital Structure, Corporate Income Tax Rate, GDP and Kurs are significant. But, CKPN, Dummy Public and BI Rate are not significant. Therefore, the use of taxation as one instrument of fiscal policy has the function of budgetary and regulatory functions and it should be aligning with monetary policy.


Taxation, Macroeconomics, bank capital structure, financial sector, econometric models 


  1. Albertazzi and Gambacorta. Bank Profitability and Taxation, Journal of Banking & Finance 34 (2010) 2801–2810  
  2. Allen, D, E, 1993, The Pecking Order Hypothesis: Australian evidence, Applied Financial Economic Volume, Vol. 3: 101-112.  
  3. Alti, Aydogan, 2006, How Persistent Is the Impact of Market Timing on Capital Structure?, The Journal Of Finance Vol. LXI, No. 4 - August 2006.  
  4. Baba, Naohiko dan Sinichi Nishioka, 2004, “Dynamic Capital Structure: How Far Has the Reduction of Excess Leverage Progressed in Japan?” Bank of Japan Working Papers Series.  
  5. Baker, Malcolm dan, Jeffrey Wurgler, 2002, Maket Timing and Capital Structure, The, Journal Finance, Volume 57,1-32
  6. Barnard, Andrew (2009, The Effects Of Taxes And Benefits On Household Income, 2007/08, Economic & Labour Market Review Vol 3 No 8  
  7. Baskin, J, (1989) ; an empirical investigation of pecking order hypothesis, financial management, pp 26- 35  
  8. Bayless, M,E & Diltz, J,D (1994) Securities Offering And Capital Structure Theory, Journal Of Business And Accounting, 21(1), 77-91  
  9. Berger et all. Capital Structure and Firm Performance : A New Approach to Testing Agency Theory and an Application to the Banking Industry . FSB-Januari 2003.  
  10. Bennett, M, and R, Donnelly (1993), `The Determinants of Capital Structure: Some UK Evidence', British Accounting Review, Vol. 25, pp. 43-59  
  11. Hemmelgarn, T. & Teichmann, D. 2013. Tax reforms and the capital structure of banks. Taxation Papers 37, Directorate General Taxation and Customs Union, European Commission. Brealey, Richard A, Stewart C, Myers, Alan J, Marcus, 2001, Fundamentals of, Corporate Finance  
  12. Horvart, Balint L. Impact of Taxation on Bank Leverage and Asset Risk. Tilburg University : ISSN 0924-7815 ISSN 2213-9532  
  13. Kundid, Ana. How Much Is The Choice Of Capital Structure Important For Bank Profitability In Croatia?. Zagreb International Review Of Economics & Business 15,3 (Dec 2012): 53-68  
  14. Sharma, Asha ( 2012 , Cost Of Capital And Profitability Analysis (A Case Study Of Telecommunication Industry), Journal Of Commerce & Accounting Research Volume 1 Issue 4 October 2012  
  15. Shyam-Sunder, L,, dan S,Myers, 1999, “Testing Static Tradeoff against Pecking Order, Models of Capital, Journal of Financial Economics 51, 219-244  
  16. Stiglitz, J,E, 1969, A Re-Examination of the Modigliani-Miller Theorem, American Economic Review, 59, 5, 784-793  
  17. Thies, C, F, and Klock, M, S, (1992), Determinants of Capital Structure, Review of Financial Economics, 1(2), 40-53  
  18. Titman, S, dan R, Wessels, (1988), “The Determinants of Capital Structure Choice”, Journal of Finance, 43, pp. 1-19.

Cite this Article: