Title: The effect of managerial choices around liquidity, leverage, and company size on corporate bond yield: a case study from Indonesia

Authors: Hari Gursida; Yohanes Indrayono

Addresses: Universitas Pakuan, Jalan Pakuan, Bogor, West Java, Indonesia ' Universitas Pakuan, Jalan Pakuan, Bogor, West Java, Indonesia

Abstract: This study uses structural equation modelling (SEM) to chart the effects on bond yield of managerial choices around capital structure, as captured by company size, leverage and liquidity. Results are based on a sample of 22 Indonesian companies, over the period 2012-2016. The study contributes to an understanding of the effects that managerial choices around financing strategies exert on bond yield. It finds that only company size has a statistically significant direct effect on bond yield. When company size is held as a moderator variable, both leverage and liquidity display positive indirect effects. The aggregate effect of leverage on yield is positive, and that of liquidity is negative, when company size is employed as a moderator variable. A secondary result is that different accounting definitions of leverage and liquidity may alter the direction of the estimated effect, thereby recommending caution in basing financing strategies solely on accounting metrics.

Keywords: liquidity; leverage; company size; bond yield; Indonesia.

DOI: 10.1504/IJBEM.2022.121761

International Journal of Business and Emerging Markets, 2022 Vol.14 No.2, pp.156 - 169

Received: 28 Jun 2019
Accepted: 15 Aug 2019
Published online: 07 Apr 2022 *

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