Return on Equity, Asset Growth, Firm Size and Debt Equity Ratio of the Real Estate and Property Sub Sector Companies Listed on Indonesia Stock Exchange Period 2014-2018

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Return on Equity, Asset Growth, Firm Size and Debt Equity Ratio of the Real Estate and Property Sub Sector Companies

Listed on Indonesia Stock Exchange Period 2014-2018

Moh Yudi Mahadianto^1*, Siti Nur Hadiyati¹, Nanda Nadya Fatmala Soeparmo¹

1 Faculty of Economic, Universitas Swadaya Gunung Jati, Cirebon, Indonesia

*Corresponding Author: [email protected] Accepted: 15 October 2020 | Published: 31 October 2020

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Abstract: This study aims to examine the effect of Return On Equity, Asset Growth, and Firm Size to Debt Equity Ratio in Property and Real Estate Sub Sector Companies listed in Indonesia Stock Exchange (IDX) period 2014-2018. The type of research is basic research with using qualitative methods. The population in this study amounted to 55 Property and Real Estate Sub Sector Companies listed in Indonesia Stock Exchange (IDX) period 2014- 2018. The sample in this study amounted to 21 companies for 5 periods, so the sample are 105 samples. The method of sampling is used purposive sampling. The analysis of this study used descriptive statistical analysis, the classic assumption test in the form of normality test, multicolinearity test, heteroscedaticity test, and autocorrelation test, multiple linier regression analysis, hypothesis testing (t-test) and coefficient of determination test (R2). The result of this study is indicate that Firm Size has an effect on Debt Equity Ratio, while Return On Equity and Asset Growth has no effect on Debt Equity Ratio on the Property and Real Estate Sub Sector Companies listed in Indonesia Stock Exchange (IDX) period 2014-2018.

Keywords: Return on Equity, Asset Growth, Firm Size, and Debt Equity Ratio

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1. Introduction

Company development to anticipate increasingly sharp competition as it is today will always be carried out by both large and small companies. This effort is a problem in itself for the company because it is related to fulfilling the funds needed by the company. In choosing a source of funds, the company must think carefully because this will affect the company's capital structure. The debt ratio of course varies across countries. Indonesia's debt ratio in 2018 was 29.98%, this debt ratio is lower than other ASEAN countries such as Malaysia at 50.9%, Thailand at 41.8%, and the Philippines at 42.1%.

The property and real estate sector is one of the sectors that are vulnerable in the macro industry to fluctuations in interest rates, inflation, and exchange rates which will ultimately affect people's purchasing power. The challenges that will be faced by the property and real estate sector include the impact of the economic slowdown in 2015 which had an impact on decreasing purchasing power. The fluctuation in the rupiah exchange rate related to loans in foreign currencies is also a negative factor. The impact of the prolonged depreciation of the rupiah has begun to spread to various business sectors. One vulnerable sector is property because many development companies have debt denominated in US dollars in large numbers.

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The International rating agency Fitch Rating noted that the portion of debt denominated in each developer company listed on the IDX reaches around 50% of the total debt each. The large proportion is because debt securities denominated in dollars attract a wider investor base and have lower interest rates than local bonds or bank credit. However, these bonds in foreign currency (foreign currency) are at risk of being exposed to fluctuations in the rupiah exchange rate as is currently happening. So that if the rupiah's depreciation does not stop, property development may be collapse (Hadian, 2018).

Source: secondary data that has been processed (2020) Figure 1: Debt Equity Ratio Data

This graph shows that the level of Debt Equity Ratio (DER) during 2014-2108 fluctuated.

The higher the DER level of a company, the bigger the debt composition is compared to the total equity itself, so that it has an impact on the greater the company's burden on outsiders or creditors. If this happens continuously, it will increase the level of default risk even higher.

Besides, the amount of debt that the company bears can reduce the amount of profit that the company receives.

Several factors can affect the capital structure, including profitability, asset growth, time interest earned, firm size, and business risk (Firnanti, 2011). The capital structure in this study uses the Debt Equity Ratio (DER). In this study only uses the factors of profitability, asset growth, and company size. Profitability is the company's ability to generate profits in a certain period. The higher the profitability shows that the profit earned by the company is also high. If the company's profit is high, the company has a large enough internal source of funds so that the company needs less debt. Also, if retained earnings increase, the debt ratio will automatically decrease, assuming that the company does not increase the amount of debt.

Profitability in this study uses Return on Equity (ROE).

The next factor that can influence the capital structure is asset growth. If the company wants to do business development, the company will tend to increase the number of assets to support business development so that it requires funds to achieve this goal. Therefore, if the company has a large asset growth, it is likely that the company will need external sources of funds if the internal funds are lacking for business development so that the company's debt will also increase. The greater the assets, the higher the operating results will be followed so that it will increase the confidence of outsiders in the company; therefore the proportion of debt will be even greater.

Apart from profitability and asset growth, the capital structure is also influenced by the size of the company. The larger the size of a company, the greater the tendency to use foreign capital. This is because large companies also need large funds to support their operational

2014 2015 2016 2017 2018 MDLN 0.95 1.12 1.21 1.06 1.23 DILD 1.02 1.16 1.34 1.08 1.18 BSDE 0.53 0.63 0.57 0.57 0.72

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Tingkat DER

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activities, and one of the alternative fulfilments is foreign capital if it is felt that their capital is insufficient. Thus the greater the size of a company will increase in debt as well.

According to Nur & Masitoh (2020), Denziana & Yunggo (2017), as well as Sofat & Singh (2017) states that return on equity affects the debt to equity ratio. Meanwhile in research Said

& Jurmansyah (2019) found that return on equity does not affect the debt ratio.

Research conducted by Arif et al (2019), Maha Dewi & Sudiartha (2017), as well Firnanti (2011) states that asset growth affects the debt to equity ratio, while in the study Ningsih &

Kartika (2016) stated that asset growth does no effect on the debt-equity ratio.

Research conducted by Chakrabarti & Chakrabarti (2019), Ismaida & Saputra (2016), as well as Yartey (2011), states that the size of the company affects the debt to equity ratio.

Meanwhile in research Rahmadani et al (2019) found that firm size does no effect on the debt equity ratio.

This study aims to analyze the effect of return on equity, asset growth, and firm size on debt to equity ratio. So the hypothesis in this study is H1: does return on equity affect the debt equity ratio, H2: does asset growth affect the debt-equity ratio, H3: does company size affect the debt equity ratio.

2. Literature Review

The theory used in this research is the pecking order theory. The pecking order theory model in the capital structure explains the existence of a funding hierarchy in a company's funding decisions. Companies will tend to use internal funds rather than external funds, namely by using retained earnings, then using debt, and finally issuing new shares.

In this theory, it explains specifically that companies have sequences in the use of funds.

There is a sequence (hierarchical) scenario in choosing funding sources, namely:

1) Companies choose internal funding. Internal funds are obtained from profits (profits) generated from company activities.

2) The company calculates the target payout ratio based on the estimated investment opportunity. Companies try to avoid sudden dividend changes. In other words, dividend payments should be kept constant or, if they change, occur gradually and do not change significantly.

3) Due to the constant (sticky) dividend policy, combined with unpredictable fluctuations in profits and investment opportunities, the cash flow received by the company will be greater than investment expenditure at certain times, and will be smaller at other times. . If the cash is greater, the company will pay debts or buy securities.

4) If external funding is required, the company will issue the safest securities first.

Companies will start with debt, then with hybrid notes such as convertible bonds, and then perhaps stocks as the last resort.

Pecking Order Theory this explains why companies that have higher levels of profit have lower levels of debt and state that companies tend to seek less risky sources of funding first.

As well as explaining why most of the external financing comes from debt and also why more profitable companies are borrowing fewer funds because they have more internal funding available (Rau & Rau, 2017).

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Return On Equity

According to Fahmi (2015: 137) argues that: "Return On Equity (ROE) is also called return on equity. This ratio examines the extent to which a company uses its resources to be able to provide a return on equity". Return On Equity is a ratio to measure net profit after tax with capital alone. This ratio shows the efficient use of its capital (Kasmir, 2013:

204). Return On Equity is a ratio that measures the company's ability to generate profits with its capital (Nur & Masitoh, 2020).

Based on this definition, it can be concluded that return on equity is a profitability ratio that is often used by investors to determine their investment to measure the company's ability to generate profits by utilizing equity or capital owned by the company.

Return on Equity is used to measure the ability of a company to generate profits with equity that has been invested by shareholders. This ratio is often used by investors in comparing two or more companies for a good investment opportunity to invest in the company. The higher this ratio the better. It means that the position of the company owner is getting stronger, and vice versa.

Asset Growth

Assets are assets that are used for the company's operational activities. The larger the assets, it is expected that the greater the operational results generated by the company (Harahap &

Irawan, 2019). Astuti, et al. (2014) states that: “Asset growth is the average growth of a company's wealth. If the initial wealth of a company is constant, then at a high rate of asset growth, it means that the amount of the company's final wealth is getting bigger and vice versa. At a high asset growth rate, if the amount of final wealth is high it means the initial wealth”.

For companies, opportunities to grow or invest will increase the need for funds. This means, in addition to the available internal funds, additional funds from outside the company are also required, including debt (Setyawan, 2006).

Based on the explanation already mentioned, asset growth can be defined as the annual change in total assets owned by the company. With a high asset growth rate, the company needs more funding to support the growth rate that occurs.

Firm Size

Firm size describes the size of a company shown in total assets, total sales, average total assets, and average total sales (Saputro & Pratiwi, 2019). The larger the size of a company, the greater the tendency to use foreign capital. According to (Prasetyorini, 2013) states that:

"Company size is a scale that can classify the size of the company in various ways such as total assets, log size, stock market value, and others".

Based on the explanation that has been mentioned, it can be concluded that the size of the company or firm size is the size of the condition of a company which can be seen from the number of resources the company has, such as the company's total assets, and the company's sales level. The bigger the size of a company, the more activities it does and also has a good image for investors and the public.

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Debt Equity Ratio

This study uses the Debt Equity Ratio (DER) as the dependent variable. Investors can also see the DER level of a company in their investment decisions. Kasmir (2013: 157) explains as follows: "This ratio is useful for knowing the number of funds provided by the borrower (creditors) and the company owner. In other words, this ratio serves to determine every rupiah of own capital that is used as debt collateral". This ratio is useful for knowing the relationship between the amount of debt owed by creditors and the amount of equity provided by the owner of the company.

It can be concluded that the definition of the debt equity ratio is the company's ability to pay debt with its capital and is closely related to the creation of a capital structure that can influence the company's proper funding policy. In other words, this ratio serves to determine each rupiah of own capital used as collateral for the debt.

The use of high debt if followed by utilization for the productivity of the company's operating activities in generating profits will increase the profit distributed to shareholders. Likewise, if the use of high debt is not utilized properly, it will result in losses and difficulty paying the debt at maturity. So that managers of a company must be careful in choosing their company's funding.

Hypothesis Development

The Effect of Return On Equity on Debt Equity Ratio

The Pecking Order Theory which was put forward (Myers, 1984) explained that the company follows a funding hierarchy when the company makes decisions regarding its capital structure. The first option is to use internal funding for company investment because the costs are the lowest. If they need external funding, companies prefer debt financing to equity financing because it is cheaper (Bilgin & Dinc, 2019).

Companies that have high profits tend to use their debit in low amounts, and vice versa, if the company has low profits, it tends to use higher amounts of debt for its company activities. So that if the company has the maximum profit, the company does not need to use the source of funds originating from debt for its company activities. If the company's profit is high, the company has sufficient internal sources of funds available so that the company requires less debt. This is in line with the pecking order theory which explains that managers prefer funding from internal company funds such as retained earnings compared to external company funds such as debt.

Besides, companies that have large profits can attract investors to invest in. Companies with a good level of profit stability will be more willing to take foreign capital in corporate financing because they can pay debts along with interest. Companies that have a stable return on equity will continue to strive to increase their profits without reducing the profits given to shareholders. Therefore, the company will always seek funds to increase the company's profits from foreign capital.

This research is also supported by research results Nur & Masitoh (2020) which states that return on equity affects the debt to equity ratio. Subsequent research by Denziana & Yunggo (2017) also states that return on equity has an effect on the debt to equity ratio. And Hartiwi et al (2017) stated that return on equity affects the debt equity ratio. Based on this explanation, the hypotheses in this study are as follows:

H1: Return On Equity affects the Debt Equity Ratio.

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The Effect of Asset Growth on the Debt Equity Ratio

The growth of company assets reflects the growth of resources in the form of assets owned by the company. An increase in assets, both current assets and fixed assets, definitely requires funding (Hestuningrum, 2012). Asset growth shows when a company wants to develop a business, so the company needs to increase the number of assets to support the development of the business and requires a large enough fund. Funding can be obtained from internal funding or external funding from the company. If the company invests in assets with a high amount that exceeds the amount of retained earnings, there will be an increase in debt. So that if the internal source of funds are not capable, it is preferable to use an external source of funds, namely debt. Based on the pecking order theory, the company will choose a minimum risk funding source first, the company will use its external source of funds from debt instead of issuing new shares because this is cheaper and has a low risk. Companies with high growth rates will depend on funds from outside the company because funds from within the company are not sufficient to support high growth rates. Companies with fast growth rates have to rely more heavily on their external capital (Brigham & Houston, 2011).

This concurs with the research of Firnanti (2011) which states that asset growth affects the debt equity ratio. Apart from that research conducted by Arif, et al. (2019) states that asset growth affects the debt-equity ratio. And Maha Dewi & Sudiartha (2017) stated that asset growth affects the debt equity ratio. Based on this explanation, the hypotheses in this study are:

H2: Asset growth affects the Debt Equity Ratio

The Effect of Firm Size on the Debt Equity Ratio

Firm size is closely related to leverage because size has an impact on the risk of failure and costs of bankruptcy (Setyawan, 2006). The size of the company describes the size of a company where large companies will find it easier to get loans from outside the company in the form of debt and share capital because usually large companies are accompanied by a fairly good reputation in the eyes of the public and investors. If a company needs funding from outside parties to carry out its operational activities, the size of the company affects the number of funds needed by the company, and how the company obtains this funding (Firnanti, 2011).

Firm size can be seen from the total assets owned by the company. The higher the total assets, the bigger the company size. So that there is a tendency that the larger the company size, the greater the amount of debt held. Large companies are easier to get funding loans from external parties than small companies. The larger the size of a company, the greater the tendency to use foreign capital. This is because large companies also need large funds to

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support their operations, and one of the alternative fulfillments is foreign capital if their capital is insufficient. Based on the pecking order theory, the company will choose a minimum risk funding source first, the company will use its external source of funds from debt instead of issuing new shares because this is cheaper and has a low risk.

This research is supported by Ismaida & Saputra (2016), as well as Yusintha & Suryandari (2010) which states that company size affects the debt equity ratio. Other than that Sofat &

Singh (2017) states that the firm size affects the debt to equity ratio. Based on this explanation, the hypotheses in this study are as follows:

H3: Firm Size affects the Debt Equity Ratio 3. Methodology

Population and Sample

According to Mahadianto, et al. (2017:11) states that: "A population is a unit of analysis that has characteristics (characteristics) that distinguish it from other groups and the place where the data is measured". The population in this study were all property and real estate sub-sector companies listed on the Indonesia Stock Exchange during the period. 2014- 2018. In this study, the criteria used were (1) all property and real estate sub-sector companies listed on the IDX for the 2014-2018 period; (2) property and real estate sub-sector companies that publish their Annual Report for 2014-2018 on the official IDX website; (3) property and real estate sub-sector companies which always experienced an increase in assets during 2014-2018; (4) property and real estate sub-sector companies that earn profits during the research year. The sample is a part of the population taken according to a sampling technique that does not eliminate the inherent characteristics of a collection of elements. For the sample to be representative of the population, the researcher must pay attention to several aspects in sampling (Mahadianto & Setiawan, 2013:4). By using purposive sampling, 21 companies met the criteria for 5 years of observation so that the number of samples in this study was 105.

Operationalization of Variables Debt Equity Ratio

The dependent variable in this study is the Debt Equity Ratio (DER). Debt Equity Ratio is a ratio that is useful for knowing the number of funds provided by the borrower (the creditor) and the company owner. In other words, this ratio serves to determine each rupiah of own capital that is used as debt collateral (Kasmir, 2013:157).

DER =

Return On Equity

Return On Equity (ROE) examines the extent to which a company uses its resources to be able to provide a return on equity (Kasmir, 2013:204). In other words, ROE is the company's ability to generate profits with the equity that has been invested by shareholders.

ROE =

Asset Growth

Asset growth is the annual change in total assets owned by the company. With a high asset growth rate, the company needs more funding to support the growth rate that occurs.

GA = –

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Firm Size

Firm size is the size of the condition of a company which can be seen from the number of resources the company has, such as total assets and the company's sales level.

Size =

Data Analysis Technique

The data used in this study is secondary data from the Annual Report of the property and real estate sub-sector companies listed on the Indonesia Stock Exchange (IDX) for the period 2014-2018 which can be collected at www.idx.co.id. Data collection techniques using documentation techniques and literary techniques. The data analysis method begins with using descriptive statistical analysis, classical assumption test (normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test), multiple linear regression analysis, t-test, and the coefficient of determination (R²) test.

4. Results and Discussion

The results of this study passed the classical assumption test consisting of the normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. However, in the autocorrelation test, treatment is carried out first using a Cochrane-Orcutt Two Step because in the first test there is autocorrelation. Thus the data has met the requirements of the classical assumptions to be used in this study so that the regression can be continued.

Normality Test Results

The normality test is used to test whether the residual value resulting from the regression is normally distributed or not. The normality test used in this study is the One-Sample Kolmogorov-Smirnov Test. Testing data that is normally distributed is data that has a significance value of more than 0.05 (Sig > 0.05). Conversely, if the significance value is less than 0.05 (Sig < 0.05) it means that the data is not normally distributed.

Table 1: Normality Test Results One-Sample Kolmogorov-Smirnov Test

Unstandardized Residual

N 105

Normal Parameters, b Mean , 0000000

Std. Deviation , 45441377 Most Extreme Differences Absolute , 071

Positive , 071

Negative -, 051

Statistical Test , 071

Asymp. Sig. (2-tailed) , 200c, d

a. Test distribution is Normal.

b. Calculated from data.

c. Lilliefors Significance Correction.

d. This is a lower bound of the true significance.

Source: SPSS output results (2020)

Based on table 1, the results of the One-Sample Kolmogorov-Smirnov Test show the results of the Statistic Test value which is the Kolmogorov-Smirnov Z (KS) value of 0.071 with an

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Asymp value. Sig. (2-tailed) or a significance value of 0.200 greater than 0.05, which means that the data has been normally distributed.

Multicollinearity Test Results

The multicollinearity test aims to test whether the regression model finds a correlation between independent variables. A good regression model should not correlate with the independent variables. Multicollinearity tests can be seen from the tolerance value and Variance Inflation Factor (VIF). If the tolerance value ≤ 0.10 and the Variance Inflation Factor (VIF) ≥ 10, it is said that multicollinearity occurs. The following are the results of multicollinearity testing with tolerance values and Variance Inflation Factor (VIF) generated by the independent variables in the coefficient table, resulting in the output of SPSS 25:

Table 2: Multicollinearity Test Results Coefficients

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.

Collinearity Statistics

B Std. Error Beta Tolerance VIF

1 (Constant) -2,866 1,195 -2,399 , 018

ROE -, 384 , 577 -, 064 -, 666 , 507 , 957 1,045

GA -, 130 , 255 -, 049 -, 511 , 611 , 956 1,046

SIZE , 127 , 040 , 300 3,172 , 002 , 991 1,009

a. Dependent Variable: DER Source: SPSS output results (2020)

Based on table 2, the multicollinearity test results show that the tolerance value for the ROE variable is 0.957, Asset Growth (GA) is 0.956, and Firm Size is 0.991 where all the independent variables at this tolerance value are more than 0.10 (tolerance ≥ 0.10). This shows that there is no strong correlation between the independent variables or multicollinearity does not occur. And it can also be seen from the VIF value, the ROE variable has a VIF value of 1.045, Asset Growth (GA) of 1.046, and Firm Size (Size) of 1.009 which means that the VIF value of each variable is less than 10 (VIF ≤ 10) so that it does not occur multicollinearity.

Heteroscedasticity Test Results

The heteroscedasticity test is used to test whether the residual variants differ from one observation to another. A good regression model is one that does not occur heteroscedasticity. In this study, the heteroscedasticity test uses the Glejser test. The Glejser test is performed by regressing the independent variables and their absolute residual values. If the significance value between independent variables and absolute residuals > 0.05, heteroscedasticity does not occur. The following are the results of the Glejser test:

Table 3: Heteroscedasticity Test Results - Glejser Test Coefficients^a

Model Unstandardized Coefficients Standardized

Coefficients t Sig.

B Std. Error Beta

1

(Constant) 1,541 ,673 2,290 ,024

ROE -,393 ,325 -,120 -1,210 ,229

GA ,133 ,143 ,092 ,925 ,357

SIZE -,039 ,023 -,167 -1,713 ,090

a. Dependent Variable: ABS_RES Source: SPSS output results (2020)

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Based on table 3, the results of the heteroscedasticity-Glejser test show that the significance value of ROE is 0.229, Asset Growth (GA) is 0.357, and Firm Size is 0.090. This means that each independent variable shows that the significance value of each variable is more than 0.05. So it can be concluded that the regression model in this study is free from heteroscedasticity.

Autocorrelation Test Results

The autocorrelation test aims to determine whether in the linear regression model there is a correlation between the confounding error in the current period (t) and the confounder in the previous year (t-1). A good regression model is a regression that is free of autocorrelation.

The autocorrelation test in this study was carried out with the Durbin Watson test, which compared the calculated Durbin Watson value (d) with the Durbin Watson table value, namely the upper limit (du) and the lower limit (dl). In the first autocorrelation test there was an autocorrelation problem so that the first treatment was carried out using The Cochrane Orcutt Two-Step Procedure, following the autocorrelation test results after treatment:

Table 4: Autocorrelation Test Results What Cochrane Orcutt Has Done Two Steps

Model Summary^b Model R R Square Adjusted R

Square

Std. Error of the

Estimate Durbin-Watson

1 ,117^a ,014 -,016 ,48234 1,883

a. Predictors: (Constant), LNROE, LNGA, LNSIZE b. Dependent Variable: LNDER

Source: SPSS output results (2020)

Based on table 4, the results of the autocorrelation test carried out by Cohrane Orcutt Two Step show the Durbin-Watson value of 1.883. To find out that there is no autocorrelation, by comparing the value of the table using a significance value of 5% where the total sample size is 105 samples (n) with the number of independent variables 3 (k = 3), then in the Watson Durbin table the following values will be obtained:

Table 5: Durbin Watson Test

Based on table 5 contains the lower limit (dL) and the upper limit (dU). The upper limit value (dU) is 1.7411 and the lower limit value (dL) is 1.6237. Decision making whether there is autocorrelation is by way of dU <d <4-dU. Because the DW value of 1.883 is greater than the upper limit (dU) of 1.7411 and less than 4-1.7411 (4-dU), it can be concluded that this regression model does not have positive or negative autocorrelation so it can be concluded that it is free of autocorrelation.

T-test Results

The results of hypothesis testing using the t-test show that only the firm size variable can affect the debt equity ratio with a significance value of 0.002 less than 0.05. Meanwhile, the return on equity and asset growth variables have no effect on the debt-equity ratio by having a significance value of 0.917 and 0.918, respectively, which are greater than 0.05.

k=3

N dL dU

105 1,6237 1,7411

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Table 6: T-test Results Coefficients^a

Model Unstandardized Coefficients Standardized

Coefficients T Sig.

B Std. Error Beta

1 (Constant) -22,388 6,757 -3,313 ,001

LNROE ,007 ,066 ,010 ,105 ,917

LNGA -,009 ,090 -,010 -,103 ,918

LNSIZE 6,482 1,994 ,310 3,250 ,002

a. Dependent Variable: LNDER Source: SPSS output results (2020)

Based on table 6, the multiple linear regression equation can be obtained as follows:

DER = -22,388 + 0,007ROE - 0,009GA + 6,482SIZE + ε

The results obtained from the t-test show that only firm size affects the debt equity ratio as seen from a significance value of 0.002 less than 0.05 (0.002 < 0.05) while return on equity has a significance value of 0.917 greater than 0, 05 (0.917 > 0.05) and the growth of assets has a significance value of 0.918 greater than 0.05 (0.918 > 0.05) so that it does not affect the debt equity ratio.

Result of The Coefficient of Determination (R²)

The coefficient of determination (R²) is used to see how much the independent variable (X) affects the dependent variable (Y) which is expressed as a percentage. The Adjusted R Square value is the result of the coefficient of determination test. The coefficient of determination (R²) has a value between 0-1, the closer to 1, the greater the independent variables in explaining the dependent variable. Following are the results of the SPSS coefficient of determination:

Table 7: Result of Determination Coefficient Test(R²) Model Summary

Model R R Square Adjusted R Square

Std. Error of the Estimate

1 ,312^a ,097 ,070 ,78255

a. Predictors: (Constant), LNROE, LNGA, LNSIZE Source: SPSS output results (2020)

Based on table 7, the value of Adjusted R Square is 0.070 which indicates that the Debt Equity Ratio (DER) variable can be explained by the variable Return on Equity (ROE), Asset Growth and Firm Size of 7%, and the remaining 93% is explained by other factors.

Discussion

Return on Equity has no effect on the Debt Equity Ratio

Based on the research results that can be seen from the hypothesis testing in table 2, the variable Return on Equity has no effect on the Debt Equity Ratio (DER) in the Property and Real Estate sub-sector companies listed on the Indonesia Stock Exchange (IDX). The results of this study are in line with the results of research conducted by Said & Jurmansyah, (2019), Saputro & Pratiwi (2019), and Wulandari, et al. (2013) which state that Return On Equity (ROE) does no effect on Debt Equity Ratio (DER). However, this research is not consistent

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with the research conducted by Nur & Masitoh (2020), Denziana & Yunggo (2017), and Sofat & Singh (2017) which states that Return on Equity (ROE) affects the Debt Equity Ratio (DER).

As explained in the pecking order theory, companies use funding that comes from internal company funds rather than external funding. But in reality, the Return On Equity which has decreased every year does not affect the level of the company's Debt Equity Ratio. So that the size of a company's profits cannot guarantee the amount of debt that will be used by the company. This instability in earnings makes the company pay less attention to the amount of debt in its capital structure.

Return on Equity is a measure to assess a company's ability to earn a profit. A high rate of return allows the company to finance most of its funding needs by using funds generated internally. Information about high Return on Equity shows that the company can generate profits for the company itself and will have an impact on the debt owed by the company.

However, it seems that some companies do not only make Return On Equity as a determinant of debt taking they will use, but companies also need to consider information from other fundamental ratios that are not examined in this study so that Return On Equity does not affect the Debt Equity Ratio.

Asset Growth has no effect on the Debt Equity Ratio

Based on the research results that can be seen from the hypothesis testing in table 2, the Asset Growth variable does not influence the Debt Equity Ratio (DER) in the Property and Real Estate sub-sector companies listed on the Indonesia Stock Exchange (IDX). The results of this study are in line with research conducted by Fajrida & Marlina (2018), Ningsih &

Kartika (2016), and Astuti, et al. (2014) which state that Asset Growth has no effect on Debt Equity Ratio (DER). However, this research is not consistent with the research conducted by Harahap & Irawan (2019), Maha Dewi & Sudiartha (2017), and Firnanti (2011) which states that Asset Growth affects the Debt Equity Ratio (DER).

The increase in assets does not necessarily increase the company's debt, because companies that have abundant cash flow can use their internal funds to purchase and add assets without having to use their debt. Because the company can finance its operational activities by using its assets. This is in line with the pecking order theory which states that company managers prefer internal funding to use external funds. Therefore, asset growth has no impact on changes in the company's DER rate.

Besides, other fundamental ratio factors that affect the Debt Equity Ratio which was not examined in this study and also the value of asset growth studied in this study is not strong enough to be considered by companies in making decisions on their capital structure so that the company does not pay attention to the growing value of these assets. Therefore, asset growth does not affect the Debt Equity Ratio.

Firm Size affects the Debt Equity Ratio

Based on the results of the research which can be seen from the hypothesis testing in table 2, the variable company size influences the Debt Equity Ratio (DER) in the property and real estate sub-sector companies listed on the Indonesia Stock Exchange (BEI). The results of this study are in line with research conducted by Chakrabarti & Chakrabarti (2019), Ismaida &

Saputra (2016), and Yartey (2011) which state that firm size affects the Debt Equity Ratio (DER). However, this study is not consistent with the results of research by Nur & Masitoh

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(2020), Rahmadani, et al. (2019), and Said & Jurmansyah (2019) which state that company size does not affect on Debt Equity Ratio (DER).

The effect of firm size on the debt equity ratio can be seen from the number of total assets owned by the company because total assets are the largest value of the financial position in the financial statements. Companies that have large total assets can be used as collateral to make it easier to get loans from outside parties. Therefore, a large company size can give creditor confidence to provide loans.

The size of the company is the size of the condition of a company which can be seen from the number of resources the company has. The larger the size of a company, the greater the tendency to use foreign capital. This is because large companies also need large funds to fulfill company activities and one of the alternatives to fulfill them is foreign capital or debt.

Moreover, large companies are easier to get loans from outside parties in the form of debt or issuance of new shares because large companies usually already have a good reputation in the eyes of investors and creditors. Large companies tend to have more complex corporate activities and have a more diversified business.

Therefore, large companies also need large funds to fulfill it and one of the alternative fulfillment is with foreign capital if the funds themselves are not sufficient. Because if it is only met by internal funds, it will not be enough to fund complex company activities. This is also in line with the pecking order theory which explains that the company will use debt first and the last option is to issue new shares. Therefore, an increase in company size will have an impact on changes in the level of the company's debt-equity ratio. So that the size of the company affects the debt to equity ratio.

5. Conclusion

Based on the results of research that has been conducted, it shows that return on equity and asset growth does not effect on the debt equity ratio in the property and real estate sub-sector companies listed on the IDX for the 2014-2018 period, while firm size influences the debt equity ratio in property and real estate sub-sectors companies listed on the IDX for the period 2014-2018.

Limitations and Implications

This research is inseparable from the limitations that require improvement and development in further research. The limitations of this study are as follows: (1) The results of this study cannot represent all companies listed on the Indonesia Stock Exchange (IDX); (2) The results of the statistical test, where the coefficient of determination is only 7%. This means that there are 93% other factors that can affect the Debt Equity Ratio (DER) compared to the variables in this study.

Based on the conclusions and limitations described in this study, the suggestions that can be given regarding the debt equity ratio (DER) are as follows: (1) Further research is expected to expand the different units of analysis listed on the Indonesia Stock Exchange; (2) Future research is expected to formulate new or other research models.

The conclusion allows you to have the final say on the issues you have raised in your paper, to synthesize your thoughts, to demonstrate the importance of your ideas, and to propel your

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reader to a new view of the subject. It is also your opportunity to make a good final impression and to end on a positive note.

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