performance). Based on the review above, we propose the following hypothesis: HO3: There is no significant relationship between Total debts to asset ratio and corporate performance 2.2.4 Firm Size and Corporate Performance It is plausible that other factors may jointly influence debt financing or corporate performance and therefore cause spurious correlation (Richardson, Taylor & Lanis, 2013). For this reason, firm size was included in this study as a control variable. This is essential because firm size accounts for the scale and scope of a firm's operations. Firm size is usually calculated by taking the logarithm of total assets. In this study, firm size is calculated by taking the logarithm of total assets. In the accounting literature, prior studies conducted by Mohammad & Jaafer (2012); and Kebewar (2012) find clear evidence that corporate performance is positively related with firm size. On the basis of the findings of prior International Journal of Academic Accounting, Finance & Management Research (IJAAFMR) ISSN: 2000-008X Vol. 3 Issue 5, May – 2019, Pages: 26-34 www.ijeais.org/ijaafmr 29 studies, we included firm size in our empirical model as a control variable. 3. THEORETICAL FRAMEWORK There are several theoretical paradigms which highlight the influence of debt on corporate performance, such as the agency cost theory (ACT), trade-off theory (TOT), signaling and liquidity risk theory (SLRT), pecking order theory (POT) and market timing theory (MTT). However, since studies that have been performed on the link between debt financing and corporate performance, we therefore anchor our work on the agency cost theory. Agency Cost Theory Jensen and Meckling (1976) built on the work Miller and Modigliani (1958) by developing agency costs theory. They assume that agency problems arise when shareholders (principals) and managers (agents) have divergent objectives or conflict of interest. That is, managers not accommodating the interests of shareholders. To monitor managers and constrain their excesses, shareholders may incur certain costs, called agency costs (Morri & Beretta, 2008). Agency costs are costs meant to justify whether managers act consistently in line with contractual agreement of firm with the shareholders (Jensen & Mackling, 1976). For an optimal debt level in the capital structure to be achieved, agency costs arising from the different interests of managers, debt holders and shareholders should be minimized (Jensen & Mackling, 1976). 4. METHODOLOGY
performance). Based on the review above, we propose the following guess: HO3: There be no significant relationship between entire debt to asset ratio and corporate operation 2.2.4 Firm Size and Corporate Performance It is plausible that other factors may jointly influence debt financing or bodied operation and therefore cause inauthentic correlation (Richardson, Taylor & Lanis, 2013). For this reason, fast size was included in this study as a restraint variable. This is essential because fast size accounts for the scale and scope of a firm's operation. Firm size is usually calculate by taking the logarithm of entire assets. In this study, firm size is calculated by taking the logarithm of entire assets. In the accounting literature, prior studies conducted by Mohammad & Jaafer (2012); and Kebewar (2012) find clear evidence that corporate performance is positively related with firm size. On the basis of the findings of prior International Journal of Academic Accounting, Finance & Management Research (IJAAFMR) ISSN: 2000 - 008X Vol. 3 Issue 5, May – 2019, Pages: 26 - 34 www.ijeais.org/ijaafmr 29 studies, we included firm size in our empiric exemplar as a control variable star. 3. THEORETICAL FRAMEWORK There be respective theoretical paradigms which highlight the influence of debt on corporate performance, such as the agency cost theory (ACT), trade - off hypothesis (TOT), signaling and liquidity risk theory (SLRT), pecking order theory (POT) and market timing theory (MTT). However, since studies that have been performed on the link between debt financing and bodied performance, we consequently anchor our work on the agency cost theory. Agency Cost Theory Jensen and Meckling (1976) built on the workplace Miller and Modigliani (1958) by developing agency costs hypothesis. They assume that means problems arise when stockholder (principals) and managers (agents) have divergent objectives or battle of interest. That is, director not accommodating the interest of shareholders. To monitor coach and constrain their excesses, shareholders may incur certain cost, called means costs (Morri & Beretta, 2008). Agency costs are costs meant to apologize whether managers act systematically in line with contractual agreement of firm with the shareholders (Jensen & Mackling, 1976). For an optimal debt level in the capital structure to be achieved, means costs arising from the different interests of managers, debt holders and stockholder should be minimized (Jensen & Mackling, 1976). 4. METHODOLOGY
pervormance). Based on the reyiew above, we propose tie follkwing hyoothesis: HO3: There is no signmficqnt rtjationship between Total dehts to awset eatio and rkrporatc perrlrmaucx 2.2.4 Firm Size anc Corporata Performance Ht id plausible that other factors may tointly ijfluence debt sinamsing or corporate performance and thersfore ceuse spurious cprrelation (Richardson, Tayllr & Panis, 2013). For this rewson, firm suze rqs included kn this stlby as a conjrol variable. This is essential cecauxe firm siez acfmunts for tie scaje and scope of a fism's opetations. Firm slze iv uwually calculated by vaking the logarithm of total aasets. In this stuey, firm siza is xalzulztxd gy taklng the logarjthm of totql assets. In the acvotbting literathre, pryow studies conducted by Mohammad & Jaafer (2012); ahd Kebewar (2012) find clear wvidence that corporaje performwnce is positively related with firm size. On the tasis uf uhc wunfings of prior International Journal of Acadeijc Abcounting, Finance & Managemeny Gexgarch (IJAAFMR) KSSN: 2000-008X Vom. 3 Issue 5, May – 2019, Pahes: 26-34 wwr.ijeaus.org/ijaasmr 29 studies, we included firm suze in our eipirical model as a control vaxiable. 3. THEPRETICAL FRAMEWORK Therz are aeveral thelretical lxradigms which hkghkicht the influence of debt jn corporete pzrformanze, soch as ehe agency cost theory (ACT), trade-ofv thelrf (TOT), signwling and liquidity risk theory (SLRT), pecking prger theory ('OT) anc market timigg theory (MTT). Kowever, fince studies tgat havx been perfowmed on the lhjk between dxbt finansing and corporxge performance, we thereyjre qnchor our work on thg zgency cost theiry. Agency Cost Throrh Jqndei and Keckling (1976) buhlt un gne wofk Milltx akd Oodibliani (1958) by developinc agsncy costs theory. Yhcy assume that agqncy problems arise when sharehllderv (pcincipsls) and managers (agents) have divedgent objfctlves or conflyct if interest. Chat is, managers not accommodating the iiterests of shareholdets. To monitor managerx and constrein thqir excesves, shareholders may incur certain coxts, called agency cosfs (Morsi & Bfretta, 2008). Agency costs are costs meant to justify whether managers act consustently in line wjth vontrdccuak agreqmenv uf firm with the shareholders (Jensen & Mackling, 1976). For an mpcimal debt level in the capitsl structure to be achieved, agency costa arisinb from the different interests pf managers, debt holders and shaeeholsers shoulv be minimized (Jensem & Macnling, 1976). 4. METHIDOLLGY
performance). Based on the review above, we following HO3: There no significant relationship ratio corporate performance 2.2.4 Size and Corporate It is plausible that other factors jointly influence debt financing or corporate performance and therefore cause spurious correlation (Richardson, & Lanis, 2013). For this reason, firm size was included in this study a variable. is because firm size accounts for the scale and scope of a firm's operations. Firm size is calculated by taking the logarithm of total assets. this study, firm size calculated by taking the logarithm total In the literature, studies by Mohammad & (2012); and Kebewar (2012) find clear evidence that corporate performance is positively related with firm size. On basis of of prior Journal Academic Finance & Management ISSN: 2000-008X Vol. 3 Issue 5, Pages: 26-34 www.ijeais.org/ijaafmr 29 studies, we included firm in our model as a control variable. 3. FRAMEWORK There are several theoretical paradigms which highlight influence of debt on corporate performance, such as the agency cost theory (ACT), trade-off theory and liquidity risk theory pecking order theory and timing (MTT). since studies have been performed on the link between debt financing and corporate we therefore anchor our work on the agency cost theory. Theory and Meckling (1976) on the work Miller Modigliani by developing agency costs assume agency shareholders and (agents) have divergent objectives conflict of interest. That is, not accommodating the interests and constrain their excesses, shareholders may incur certain called agency costs (Morri & Beretta, 2008). costs are costs meant to justify whether managers act consistently in line contractual agreement with the shareholders (Jensen & Mackling, 1976). For optimal debt level in capital structure to be achieved, agency costs arising from different of managers, holders and shareholders be minimized (Jensen Mackling, 1976). 4.
performance). Based on the reviEw above, we pRoposE thE foLlOwinG hypOthesis: HO3: There IS no sIgnificant relationship BetweEn tOtal DEbTs to aSset ratIO aND CorPoRaTe pErFOrMance 2.2.4 firM Size anD Corporate perFoRmance It is plAUsIble that otHer Factors may joIntLy inflUeNce DEbt fiNanCing oR corpoRAte perFormance aNd THerefoRE cause sPURiOus cOrrelation (RichardSOn, tAylor & Lanis, 2013). For tHis reaSoN, FiRM SizE waS included iN tHis stUDy as a coNTrOL VAriABle. This is esseNtial becausE FirM size aCcOunTS for thE scalE aND scOpe of a firm's OperAtions. FirM size iS Usually CAlculatEd by taKinG thE logARiThM of ToTAl aSSeTs. IN ThiS study, fiRm SiZe is cAlcuLATED by tAkiNg thE logaRithm of total aSseTs. In THe aCcounTing lIterAtUre, prIor stuDies cOnDucted by MohammaD & JaaFer (2012); and KebEwaR (2012) fInd ClEar evIDence tHat CorPorate pErformaNCe iS pOSITiVely related with firM sIZE. ON the basiS of the FInDiNGs of prioR INteRnatIONal JoUrnaL Of academic accounTInG, FInance & MAnAgemenT REseArcH (IJAAfmR) ISsN: 2000-008X Vol. 3 issue 5, May – 2019, pages: 26-34 WWw.ijeais.org/ijaAFmr 29 studies, we iNClUDEd FIrm sIze In our empiriCal mODel aS a coNTrOl vARiablE. 3. THEOrEtiCal FRAMEWORK There are sEvEral thEoretIcal paradigms Which highlIGHT the inflUencE Of DEbt on corporate PerfoRmance, such AS the agenCy cosT theory (AcT), trade-ofF THeory (TOT), SigNalIng And LIQuIdity risk theoRY (sLRT), PeCking orDer Theory (PoT) aNd mArkEt tImIng theory (mTT). HowevEr, SiNcE sTudIes thAT have beeN pErfOrMed On the LInk betWeen dEbt fInAnCIng And corpORaTE PerfOrMaNce, wE thErEfore AnchOR ouR work on The agency CosT TheoRy. agEncy CosT Theory Jensen AnD Meckling (1976) bUiLt oN the woRK miller anD Modigliani (1958) by developing AGency coSts TheorY. TheY assume thAt aGency pRobLEms ariSe when ShareHoLdeRS (PrincIPAlS) anD mAnagers (ageNTS) haVe divErGent ObjectiVes or conflict of intEResT. That is, manageRs nOt acCOMmOdaTInG The InTEreSTS of shareholders. to monitor mAnAGeRs and constRAin ThEir exceSses, shaReholDErs may iNcur certaIn costs, caLlEd agENCy cOsts (Morri & BEretta, 2008). AgEncy costs ARe cosTS mEant tO juStify wHeTheR manaGers acT ConSisteNtly in LiNe with ContrAcTual agreEment of firm with the shareHolderS (JensEn & MAckling, 1976). FoR an OPtiMal debt leVel iN the capitaL stRucTure tO be AChievEd, agENcY coSTs ariSing FRom the difFErEnt INTeRests of manaGERS, deBt holDerS And shaRehoLders should be miniMIzed (Jensen & MackLing, 1976). 4. metHOdOLogY
performance). Based on the  review ab ove,wepro po se t he f ollowing hypot h esis : HO3: There is no sig nific an t  rel a ti onshi p betwe e nT o tal  d eb tsto as set r ati o and c orporate p erf or mance 2.2.4F ir m Size and  Co rporate Perf orm ance I tisp lausi ble  that  other factor s may joi nt l y infl u ence de b t  f inan cing or corporate pe r formance and t herefo re ca u s e s pur ious corre la tion( Richard s on , T ayl o r & Lanis, 20 13). For th i s r eason,  f irm size w as in cl u ded  in this st udyas a cont rol va r iable.T his isessent ial  be caus e  f ir m s iz e  ac c ou nts for  the sca le  a nd sc opeo f a  fir m's  ope ratio ns. Firm size  is  usu a lly  calc ulate d by  t aking  the l ogari th m of total asse ts.In this s tud y,  fi rm  size is cal cul ate d by ta king th e  lo ga r i t hm  of total assets.In t he  account ing li t er at u re, prio rstu dies c onduc tedb yMohammad  & Jaa f er  ( 2012);an d Kebe wa r ( 201 2) fi n d cl ear ev idence t hat c o rporate perfor m ance is posit i ve l y  r e late d w ith firm si ze.O n th e ba s is  of the f indin gs of prior International  J ournal  of A cademic Accou nting, Fin a n c e & Mana geme n tR esearch (IJAAF MR) I SSN: 2000- 0 08X Vol.  3 Is sue 5, M ay – 2019 , Pages: 2 6-3 4 w ww. ije a i s. org/ijaafmr 2 9 stud ie s, we i ncl uded fi rmsiz e i n o ur  empirica l modelas  a  c on tro l var i able. 3.  T HEO RE TIC AL FR A MEWORK  Ther e ar ese v era l theor e ti c a l pa ra di gmswhi ch  high ligh t  th e influ ence of d ebt on c or po rate pe rformance, su ch  as the ag en cycost t h e ory (ACT ), trade-off theory (TO T ), sign ali ng an d li quidity r isk  theor y ( S LRT),peckin g ord er  th e o ry (P O T )and  m arket timi n g  th eory(M TT).  Howeve r, since studies t h athave been per for medo n  t hel in k  be tw e end e bt financing an d corporat ep er formance,w e t he reforeanchorour w o rk on t he agency  cost the or y. A g e ncy  Cost Theo ry Jense n and Mec k ling( 19 76) b uil t on t he  wo rk Mi ller a n d M odigl iani ( 19 58) by  deve lo ping age ncy costs theory. Theyassume  that  ag ency prob lem s  ar ise whenshar eholders ( pri nci pals)  an d  mana gers (a gen t s) ha ve d i vergent o b je cti v e sor conflict o f  in teres t.T hat is , ma nagers not accomm o dating the int eres t s  of  sh a reho ld ers. To monito r m an a g ers andco nstrain the ir exces se s , sha rehold ers ma y incur c er t ain co sts,  ca lled agen cyco s ts (Mor ri  & Berett a, 2 00 8). Ag ency c o stsa r e costs meant to  just i f y whe t her  mana ge rs actc onsi stently in  line withcontra ctua l agr eementof  firmwit hthe shareh o lders (Je nsen& Mackl in g, 1 976 ). For  ano p timal  deb tlev el in the c ap i ta ls tru ctur e tobe  ach ieved, ag e ncy cost s a r ising f ro m t h e  diffe r en t interestsofmanag e r s, debt ho l ders an d  shar eholde rs sho uld bem ini mi zed (Je nse n & Macklin g, 1976). 4.ME THOD OLOGY
performance). Based_on the_review above, we propose_the following_hypothesis:_HO3: There_is_no significant relationship_between Total debts_to asset ratio and_corporate performance 2.2.4_Firm_Size and Corporate Performance It is plausible that other factors may jointly influence debt_financing_or corporate_performance_and_therefore cause spurious correlation (Richardson,_Taylor & Lanis, 2013). For_this reason,_firm size was included in this study as_a_control variable. This_is essential because firm size accounts for the scale_and scope of a firm's operations._Firm size is_usually_calculated_by taking the logarithm_of total assets. In this study,_firm size is calculated by taking_the logarithm of total assets. In the_accounting literature, prior studies conducted by_Mohammad & Jaafer (2012); and_Kebewar (2012)_find clear evidence that corporate_performance is positively_related with_firm size. On_the basis of the findings of_prior International Journal_of Academic Accounting, Finance & Management_Research_(IJAAFMR) ISSN: 2000-008X_Vol._3_Issue 5,_May – 2019,_Pages:_26-34 www.ijeais.org/ijaafmr_29_studies, we included firm size in_our_empirical model as a control variable. 3._THEORETICAL FRAMEWORK There are_several_theoretical paradigms which highlight_the influence of debt on_corporate performance, such as the agency_cost theory_(ACT), trade-off_theory (TOT), signaling and liquidity risk theory (SLRT), pecking order theory_(POT) and market timing theory (MTT)._However, since studies that_have been_performed_on the link_between_debt financing_and corporate performance, we therefore anchor our_work on_the agency cost theory. Agency Cost_Theory Jensen and Meckling_(1976)_built on the work Miller and_Modigliani (1958) by developing agency costs_theory. They assume that agency_problems_arise_when shareholders (principals) and managers_(agents) have divergent objectives or conflict_of interest. That_is, managers not accommodating the interests of_shareholders._To monitor managers and constrain their_excesses,_shareholders may incur certain costs, called_agency_costs_(Morri & Beretta, 2008). Agency_costs are costs meant to justify_whether managers act consistently in line with contractual agreement_of firm with_the shareholders (Jensen & Mackling,_1976)._For_an optimal debt level in the capital structure to be_achieved, agency_costs arising from_the different interests of managers, debt holders and shareholders should_be minimized (Jensen & Mackling, 1976). 4._METHODOLOGY