<![CDATA[Purpose: This study investigates whether the optimal capital structure exists in the construction sector in Southeast Asia during the period 2015–2024. The existence of an optimal capital structure indicates that debt risk can be managed by maintaining debt at a level that balances the financing benefits with the associated financial risks. Methodology/approach: This study employs an exploratory quantitative design using an unbalanced panel dataset consisting of 1,440 firm-year observations. The relationship between capital structure and cost of capital is examined using static and dynamic panel data models estimated with Stata to evaluate the robustness of the evidence. Findings: The static panel model identifies a quadratic non-linear (U-shaped) relationship between capital structure and cost of capital, with an estimated optimal DER of 165.26%. However, this relationship is not confirmed by the dynamic panel model after accounting for adjustment dynamics, indicating that evidence for an optimal capital structure depends on the econometric specification used. Practical implications: For managers, maintaining a debt level close to the estimated optimal DER of 165.26% can improve financing efficiency when the underlying conditions are consistent with the static model. For regulators, this finding provides empirical evidence that can serve as a policy basis aimed at monitoring corporate leverage and reducing financial risks associated with excessive debt in the construction sector. Originality/value: Instead of relying on a single estimation approach, this study compares static and dynamic panel estimates to test the robustness of evidence regarding the existence of an optimal capital structure. The contrasting results highlight the importance of considering adjustment dynamics when evaluating capital structure decisions in the Southeast Asian construction sector, a context that remains underexplored in the literature.]]>
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