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Journal of Accounting and Investment
Published by Universitas Muhammadiyah Yogyakarta
ISSN : 26223899     EISSN : 26226413     DOI : 10.18196/jai
Core Subject : Economy,
Economics, Econometrics & Finance
JAI receives rigorous articles that have not been offered for publication elsewhere. JAI focuses on the issue related to accounting and investments that are relevant for the development of theory and practices of accounting in Indonesia and southeast asia especially. Therefore, JAI accepts the articles from Indonesia authors and other countries. JAI covered various of research approach, namely: quantitative, qualitative and mixed method.
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Articles 11 Documents
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Search results for , issue "Vol 22, No 2: May 2021" : 11 Documents clear
Internal or External Financing: New Evidence on Investor Reaction in Indonesian Manufacturing Firms Rifki Fikasari; Yustrida Bernawati
Journal of Accounting and Investment Vol 22, No 2: May 2021
Publisher : Universitas Muhammadiyah Yogyakarta, Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (548.9 KB) | DOI: 10.18196/jai.v22i2.10711

Abstract

Research aims: This study aims to examine investor reaction to financing sources due to its pecking order theory hierarchy.Design/Methodology/Approach: This research used a purposive sampling method of manufacturing listed firms on the Indonesia Stock Exchange, which were tested utilizing Ordinary Least Square and SPSS software.Research findings: The results showed that the investor reacted negatively to internal financing measured by the firm's retained earnings. Conversely, this research found that investors reacted positively to external financing in measurement, leverage, and equity issuance. Furthermore, the results revealed that leverage had a more positive reaction than equity issuance.Theoretical contribution/Originality: This research contributes to the pecking order theory literature to test how investor reacts to which source of financing is chosen due to its hierarchy. There is evidence that Indonesian manufacturing firms had inadequate internal financing, which made investors react negatively, and investors tended to choose leverage over equity as external financing.Practitioner/Policy implication: Our study contributes to the firm's management to carefully choose financing sources to fulfill the investor interest. This research also suggests that the firm produces more profit to provide adequate internal source financing as the research results showed that investors preferred internal than external financing. Furthermore, when there is inadequate internal financing, the firm's management should use leverage over equity.Research limitation/Implication: First, our study employed total liability rather than debt to leverage measurement. Second, our study only provided evidence of negative reactions to show that the firm failed to provide adequate internal financing sources rather than examined the level of adequate internal financing sources.

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