Title: RESOURCE SELECTION DECISIONS AND FACTORS THAT INFLUENCE THEM.

Authors: Utami Wahyu Lestari

Item Type : Thesis (Thesis)

Affiliations: Master of Management Study Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

This research is motivated by a company's development life cycle: introduction, growth, maturity, and decline. One interesting cycle to observe is the company's growth phase. During the growth cycle, companies face market challenges, including increasing sales and expanding market share. Consequently, the company's working capital increases, and once it reaches full capacity, investment in fixed assets is required. Therefore, the company requires substantial funding sources to finance its growth. So, how does a company finance its growth if its financing exceeds sustainable growth or the strength of its financial resources at a given time? The purpose of this study is to determine the decision to choose a source of funds for manufacturing companies when actual sales growth exceeds sustainable growth and the factors that influence it. Therefore, this study aims to determine the relationship between the decision to choose a source of funds and actual sales growth that exceeds sustainable growth in manufacturing companies listed on the Jakarta Stock Exchange. In this study, three alternative funding source decisions are identified: retained earnings, debt, and equity. In addition, to determine the influence of actual sales growth, total asset turnover, leverage, and asymmetry information on the decision to choose funding sources between internal and external funding sources and between debt and equity funding sources in manufacturing companies that have actual sales growth exceeding sustainable growth. The population of this study was all manufacturing companies listed on the Jakarta Stock Exchange in 1993-1996, while the target population was 37 manufacturing companies that had actual sales growth exceeding sustainable growth. To determine the relationship between the decision to choose funding sources and actual sales growth exceeding sustainable growth, a chi-square analysis was used with a significance level of (a) 5%. Furthermore, to determine the influence of actual sales growth, total asset turnover, leverage, and asymmetry information on the decision to choose funding sources between internal and external funding sources and between debt and equity funding sources, a logit analysis (logistic regression) was used with a significance level of (a) 5%. The results of the study indicate that there is a significant relationship between the decision to choose funding sources and actual sales growth exceeding sustainable growth in manufacturing companies listed on the Jakarta Stock Exchange. The contingency table shows that manufacturing companies tend to use external funding sources in the form of debt to meet their financing needs when the company experiences actual sales growth exceeding sustainable growth during the period 1993-1996. Logit analysis I proves a negative influence of the actual sales growth factor on the decision to choose funding sources between internal and external funding sources. This shows that the higher the actual sales growth, the company tends to choose to use external funding sources. Conversely, the lower the actual sales growth, the company tends to choose to use internal funding sources. Meanwhile, logit analysis 11 proves a positive influence of the total asset turnover factor and asymmetry information on the decision to choose funding sources between debt and equity funding sources in manufacturing companies that have actual sales growth exceeding sustainable growth. This shows that the higher the total asset turnover and asymmetry information, the company tends to choose to use debt funding sources. Conversely, the lower the total asset turnover and asymmetry information, the company tends to choose to use equity funding sources.

Keywords: Financing Decision, Fund Resources, Actual Sales Growth, Sustainable Growth.

Sources: http://repository.unair.ac.id/34787/