Jurnal Akuntansi, Vol 10 No.

1, Januari 2023 p-ISSN 2339-2436

Http://doi.org/10.30656/Jak.V10i1.5109 e-ISSN 2549-5968

THE EFFECT OF SUSTAINABLE PERFORMANCE ON CAPITAL STRUCTURE :

CASE OF HIGH TECH COMPANIES IN INDONESIA

Agus Triyani1, Wulan Budi Astuti2, Salsabilla Putri 4

[email protected] , [email protected], [email protected]
Program Studi Akuntansi, Universitas Wahid Hasyim

Suhita Whini Setyahuni3

[email protected] 3,
Program Studi Manajemen, Universitas Dian Nuswantoro

Abstract
Sustainability performance plays an important role in the business entities. Recently, stakeholders
are no longer focus on the single financial performance, but rather put their attention on the business
sustainability comprehensively. Since the high-tech companies have the high level of innovation
and high uncertainties, sustainability performance received more attention from business
practitioners. The high technology in the company can greatly improve the world economy because
it greatly affects the potential for global competitiveness. This study intends to examine the effect
of sustainability performances on the capital structure of High-Tech Companies in Indonesia. High-
Tech Companies faced uncertainty and high-risk in collecting capital due to market issues, a lack
of resources, and also issues in technology implementations. Therefore, High-Tech Companies are
facing sustainability performances issues that might affect capital structures. We analyzed 143
High-Tech Companies in Indonesia. We identified factors that affect capital structure of High-Tech
Companies, such as firm performances, firm growth and CSR performances. Firm performances
were measured by ROA and ROE, while firm performances were measured by asset growth and
sales growth, and CSR performances were measured by employees, social, and environmental
aspects. The result indicated that ROA and ROE were negatively impacted the capital structure of
High-Tech Companies. Meanwhile, CSR performances and asset growth were positively affected
the capital structure of the companies. In addition, sales growth has no effect on capital structure
of High-Tech Companies. Our research used a new perspective of CSR performances that used
more comprehensive indicators which are employees, social, and environmental individually. Our
findings contributed to the development of legitimacy theory which focus on capital structure and
sustainability aspects.

Keywords : Sustainability performances, Capital structure, CSR performances, High-tech

company.

INTRODUCTION
Technology is the most important aspects in creating innovations. The existence of high
technology in the company can improve the huge world economy growth because it greatly affects
the potential for global competitiveness. According to Haseeb et al., (2019), the industrial
revolution 4.0 requires technology in order to enhance the sustainable business performance. Along
with global economic growth and the widespread implementation of sustainability performance
that has been carried out, many companies have paid attention to the important of balancing
financial performance and Corporate Social Responsibility (CSR).

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CSR is carried out as a step of caring for others for the benefit of human development and
the environment based on appropriate and professional procedures (Sunaryo, 2015). However, the
role of CSR in high-tech companies is still little used for research, especially regarding the
obstacles that most burden the company's performance and growth in obtaining debt financing.
Capital structure is used to analyze the structure of long-term debt with own capital. Companies
that meet funding usually look for more efficient funding alternatives by using leverage analysis,
namely the Debt Equity Ratio (DER) analysis. This ratio is used to measure the level of use of debt
to the total equity of shareholders owned by the company (Spitsin et al., 2021). The optimal capital
structure can be interpreted as a capital structure that can minimize the overall cost of using capital
(Adhari & D., 2015).
According to research conducted by Gan et al.,(2021), profitability and company growth have
an impact on debt financing. The sampling used in his research reveals that growth and profitability
against leverage are unresolved problems in Russia. The instability of the level of the economy in
a country can be an important factor for analyzing changes in financial performance during a crisis
(Lee, 2016; Spitsin et al., 2021). The effect of financial leverage and company growth becomes
very important during economic transition because it can worsen company finances and company
growth (Spitsin et al., 2021).
This study aims to find out whether high-tech companies can attract more debt (capital
structure) in improving Sustainability Performance ( performance , growth and CSR activities).
This study uses CSR as a form of Sustainable Performance in addition to profitability and company
growth. CSR which is used to analyze High Tech Company uses three basic reporting categories,
namely Employee, Social and Environmental to determine the effect on the capital structure.
(Grabinska et al., 2021) explains that the category of employees in CSR reporting is the most
dominant thing compared to social and environmental. Many companies choose to focus on
employees because they are able to interesting more many financing debt. Research conducted by
(Grabinska et al., 2021) explained that employees have an important role in upgrading the company
to high-tech i.e. talented researchers, programmers, and engineers.
This study refers to research conducted by (Grabinska et al., 2021) which uses CSR to analyze
the capital structure of high-tech companies. According to Branco and Rodrigues 2020 companies
carrying out CSR activities are driven by two kinds of motivation. The first is to maintain good
relations with stakeholders , and the second is to create a competitive advantage for the company
that distinguishes similar competing companies. This research focuses on high-tech companies that
won Indonesia Digital Innovation in 2018-2020 which are listed on the Indonesia Stock Exchange.
2018 is the year were more than 1.200 high-tech companies grew up in Indonesia
(Greenhouse.co.id). Therefore, our observation is started from 2018 to 2020. This research was
compiled on the basis of the lack of literature related to sustainable performance research that
discusses the triple bottom line, namely People, Planet and Profit for high-tech companies (John
Elkington, 1997). The company's growth performance and CSR performance play a very important
role in increasing the company's capital structure (Spitsin et al., 2021) . In addition, this study also
analyzes the impact of the company's performance and growth on the capital structure. Companies
with high sales growth rates have a tendency to use debt as a source of more external funds than
companies with lower sales growth rates (Anggun et al., 2015). The criteria of high-tech companies
where need more external funds and have a higher risk than low-tech companies. Legitimacy theory
is used empirically to explain the capital structure of high-tech companies related to sustainable
performance .

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LITERATURE REVIEW
Legitimacy theory states that the company is a social sub-system that is inseparable from
society (Rezaee & Tuo, 2017) . Society as a wider social system expects a synergy between the
company as a profit entity unit and elements of the community as a provider of resources. This
synergy can be obtained through activities called corporate social responsibility (CSR). The
company tries to provide as close as possible to the public an overview of its business activities.
The company strives to meet the expectations of society and proves that the company's business
activities have complied with the norms and rules in society. The company's communication with
the community to prove that the company has carried out its responsibilities as part of the social
system is through reporting and disclosing CSR activities. Companies that have good social
performance are also proven to have good CSR activity reporting (Bernardi, C., Stark, 2016) .
Companies that have good social performance will increase public trust in the company's
existence (Rezaee & Tuo, 2017) which will ultimately make the company accept legitimacy from
the community (Rezaee et al., 2020) . Legitimacy means that companies are allowed to access
resources available in the community for the company's operational and business interests.
Companies that accept community legitimacy can benefit from ensuring the sustainability of the
company's operations in the long term, which is also called sustainability performances. On the
other hand, companies that fail to meet community expectations will find it difficult to maintain
the continuity of operational activities in the long term. The company will experience difficult
conditions because its existence is not accepted by the community, which is reflected in the
indications of social conflict with the community.
Research on the effect of sustainability performance on the company's financial performance
has become a concern of researchers. Empirical evidence proves the positive influence of
sustainability performance on the company's financial performance. Research by (Kareem AL Ani,
2021) examines the effect of CSR disclosure on earnings quality. This research was conducted on
205 public companies in Kuwait. The results of the study prove that there is a positive influence
between CSR disclosure on the quality of company earnings. According to (Kareem AL Ani, 2021)
, CSR disclosure is a form of corporate communication to the public regarding the achievement of
corporate social performance. CSR has helped improve the quality of financial reports through
improving the quality of earnings. CSR also helps increase the allocation of resources in the capital
market.
The results of the study (Spitsin et al., 2021) explain that company size increases its
dependence on loan capital. On the other hand, the company's growth, both asset growth and sales
growth, has a positive effect on leverage. Profitable growth in company assets leads to a smaller
increase in borrowed capital. In addition, the very profitable growth of the company's assets led to
a decrease in loan capital. Another study on the company's sustainability performance was
conducted by (Rezaee et al., 2020) . This study supports the findings of Kareem AL Ani (2021)
which proves the influence of CSR performance on the quality of company earnings. Research by
Rezaee, Dou and Zhang (2020) found that there is a positive influence between CSR performance
and earnings quality. Companies with high CSR performance tend to have lower opportunities to
manipulate earnings. This is because the company realizes that profit is not the only short-term
goal of the company's activities. However, the company's focus is broader on the fulfillment of the
rights of stakeholders as a whole, including the community as a provider of resources. (Rezaee et
al., 2020) .
In the context of High-Tech Companies, which are generally emerging companies with
limited financial resources (Grabinska et al., 2021) , sustainability performance is a crucial factor

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in companies. The provision of capital as the main resource of a company that is in the developing
stage and requires more attention to high-tech investment, of course, requires a special strategy.
The company's financial performance can reach a wider aspect, including the company's capital
structure. The company's capital structure is divided into two major parts (Fama & French, 2003)
. The first is the provision of capital in the form of shares by investors. The second is capital
financing in the form of debt by creditors. At this stage of development, the company needs more
capital allocation to support the company's operations. on the other hand, High-Tech Companies
also face a high risk of uncertainty due to liquidity problems. In this condition, financing through
debt is a more realistic option before investor confidence is built to gain access to share capital. To
get access to debt financing, companies must show good growth potential so that prospective debt
providers, in this case creditors, have confidence in the company's potential. The company must
also show that the overall performance shows a positive trend from time to time. The company's
performance will be a determining factor in obtaining access to debt financing. Thus, the better the
company's performance, the lower the company's ability to obtain debt financing because the
financing needs use the profit share and share capital. The first hypothesis can be formulated as
follows: H 1 : The company's performance has a negative effect on the company's capital structure

Company growth is a condition that shows the progress of the company's achievement of its
operational performance. High-tech companies have the characteristics of high market potential
and opportunities. However, on the one hand, High-Tech Companies need quite a lot of capital at
the beginning of their establishment to support accelerated growth. The emphasis on the need for
investment in high technology also makes the need for capital higher. The increase in sales needs
to be accompanied by a proportional working capital requirement. The higher the increase in sales,
the greater the need for working capital (Spitsin et al., 2021). The increasing need for working
capital will encourage companies to increase funding, both from shares and debt. High-tech
companies , which still have difficulty accessing equity investment funding, require more capital
from liabilities (Spitsin et al., 2021) . Thus, the higher the level of sales, the higher the debt structure
of the company. The easiest asset financing for high-tech companies is debt financing (Spitsin et
al., 2021) . According to Ardalan (2017) , companies with debt structures have more benefits in
the form of lower debt costs than stocks. Companies with more debt structure than stocks. Debt
financing can increase the rate of return (ROR) and earnings per share (EPS). Along with the
increasing need for assets for working capital, companies increasingly need more capital, especially
those from debt. The second hypothesis can be formulated as follows:
H2: Company growth has a positive effect on the capital structure of High-Tech Companies

The company's sustainability performance is an indicator of company performance that is

more comprehensive and has a longer period of time than the company's financial performance
(Qiu et al., 2014) . In the perspective of legitimacy theory , companies with better CSR performance
can also gain access to better resources from the community because the company has been
declared legitimate to be able to operate in the community (Rezaee & Tuo, 2017) . High-tech
companies , which in this context are companies that are still in the development stage and require
high allocation of resources, will desperately need access to resources from the community. CSR
performance can help companies to prove to the public that a company that is in the developing
stage has social responsibility and great potential for growth (Grabinska et al., 2021). The better
the High-Tech Companies in proving good CSR performance, the better the public's trust in

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providing access to resources in the form of capital. Thus, the fourth hypothesis can be stated as
follows:
H3: CSR performance has a positive influence on the capital structure of High-Tech
Companies

Firm performances H1

H2
Capital Structure
Firm Growth
H3

CSR Performances

IMAGE 1
Research Framework

METHOD
Sample and Population
The population in this study are public companies listed on the Indonesian Stock Exchange.
The sample was taken using purposive sampling technique . The criteria used in sampling are
companies that nominated the " Indonesia Digital Innovation Award " during 2018 to 2020.
Research design
The variables used in this study include the dependent variable, the independent variable.
The dependent variable is the Capital Structure, which is measured by the company's leverage.
While the independent variable in this study is sustainable performance covering three aspects,
namely company performance, growth and CSR performance. The company's performance
variable is measured by the ROA and ROE profitability ratios, the growth variable is measured by
the asset growth and sales growth variables, and the CSR performance variable is measured by
disclosure.
The variables descriptions and measurement indicators are presented in table 1
Number Variables Definition Measurement Descriptions
Dependent Variabel

1 Capital Capital structure is a DER = Total Debt DER (Debt to

structure comparison or balance of the / Total Equity Total Equity
(Martono and company's long-term Ratio)
Harjito, 2012). funding which is indicated
by the comparison of long-
term debt to its own capital.
Variabel independent

1 Company Company performance is ROA = Earning ROA =

performance defined as the company's Before Tax / Total Return On
(Spitsin, 2021) ability to achieve its goals Aktiva Asset
through efficient and
effective use of resources

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and also describes how far a ROE = Earning ROE (Return

company achieves its results After Tax / Total On Equity).
after being compared with Ekuity
previous performance

2 Company Company growth is how far AG = (total aset t AG = Asset

Growth the company puts itself in the – (total aset t-1)) / Growth
(Machfoedz, overall economic system or (total aset t-1)* SG = Sales
2007). the economic system for the 100% Growth
same industry (Machfoedz,
2007). SG = (total
The indicator in the Penjualan t –
company's growth according (total penjualan t-
to Udayana, 2016 is total 1)) / (total
assets. This indicator acts as Penjualan t-1)*
a calculation material to 100%
determine the company's
growth by calculating asset
growth and sales growth,
namely the difference
between the total assets/sales
of this period and the
previous period so that it can
be seen whether the
company's growth has
increased or decreased.
3 CSR Waddock and Bodwell, CSR disclosure
Performance provide a definition of CSR according to GRI
(Grabinska, is the way in which a using employee
2021) company's operating categories (14
practices (policies, indicators),
processes, and procedures) environmental
affect stakeholders. (30 indicators)
Interests and environment and social (8
indicators)
Total 52
Indicators

CSRI =
∑Xyi/ni
(imade

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Data analysis technique

Since all the variables are in rasio metrics, we employ multiple regression analysis, to test the
hypotheses. The regression model is as follows:
LEVi,t = α + β1 ROEi,t + β2 ROAi,t + β3 G_ASSETi,t + β4 G_SALES+ β5 CSR_EMP+ β5 CSR_SOC+ β6 CSR_ENV
i,t + ε ….(1)

Where:

LEVi,t = Capital Structure i year t

α = constant
β = regression coefficients
ROA = Return on Assets profitability ratio
ROE = profitability ratio Return on Equity
G_ASSET = Asset Growth
G_SALES = Sales growth
CSR_EMP = Employee category CSR
CSR_SOC = Social category CSR
CSR_ENV = Environmental category CSR
ε = other factors outside the research model
Prior to the regression test, the model will first be tested for classical assumptions to get the best
predictor model free from bias.

RESEARCH RESULTS AND DISCUSSION

The population used in this study are companies listed on the Indonesia Stock Exchange.
Samples were taken using purposive sampling technique. The criteria used in sampling are
companies that won the "Indonesia Digital Innovation Award 2018-2020". The sample used
describes a High-Tech Company using a company that won the Indonesia Digital Innovation Award
in 2018-2020. In 2018 there were 85 companies, in 2019 there were 84 companies, in 2020 there
were 82 companies. From the results of the selection of sampling criteria from 2018-2020, a
sampling of 143 companies during 2018-2020 was obtained.
The results of the study are presented in table 1.
Standard Park Adj R
Variable Min Max mean VIF KS DW t Sig
Deviation test Square
LEV 0.050 10,200 2,398 2.127 1.543
ROA 0.001 0.400 0.056 0.069 1.585
ROE 0.002 4,100 0.156 0.372 1,874
G_SALES 0.300 20,000 1.151 1,603 1,824
G_ASSET 0.600 2,400 1.069 0.185 3.045
CSR_EMP 0.100 0.600 0.482 0.124 1,539
CSR_SOC 0.100 0.600 0.332 0.118 4.486
CSR_ENV 0.100 0.400 0.220 0.094 8,341
TCSR 0.10 0.50 0.306 0.087 1.543
Dependent-
0.63
LEV
0.132 - .000
ROA 0.714 1,890
5.710
0.111 - .000
ROE
4.095

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G_SALES 0.238 509 .612

G_ASSET 0.352 2,764 .007
0.094 - .286
CSR_EMP
1.072
CSR_SOC 0.210 .651 .516
0.415 - .009
CSR_ENV
2,644
TCSR 0.120 2,140 .034

LEV = Capital Structure

ROA = Return on Assets profitability ratio
ROE = profitability ratio Return on Equity
G_ASSET = Asset Growth
G_SALES = Sales growth
CSR_EMP = Employee category CSR
CSR_SOC = Social category CSR
CSR_ENV = Environmental category CSR
TCSR = TOTAL CSR
*significant at the 0.05 level

Based on table 1 , the termination coefficient for capital structure has an r adjusted square of
0.63. This can indicate that the above variables can explain the variable capital structure of a high
tech company by 63% a while the rest is explained by other variables . As for the classical
assumption test, it can be explained that in the normality test, the value of Kolmogorov Smirnov is
0.714 above a significance of 0.05, meaning that the data used in this study is normal. For the
multicollinearity test, it was found that the VIF value was below 10, meaning that the data did not
have symptoms of multicollinearity. For autocorrelation test that DW = 1.890 the regression model
is between DW table, namely du = 1.8 62 and 4-du = 2.1 38 with n = 1 42 and k = 9. It can be
concluded that there is no autocorrelation in the regression model . As for the heteroscedasticity
test carried out using the Park test, it can be seen that the significance value of the Park test is above
0.05 so that the research data avoids heteroscedasticity symptoms.

The Influence of Company Performance on the Capital Structure of High-Tech Companies

The results of statistical tests show that the company's performance has a significant effect
on the Capital Structure of High-Tech Companies. ROA shows a negative and significant
relationship to the company's capital structure with a significance value of 0.000 below 0.05. as
well as ROE which has a negative and significant relationship with a significance value of 0.000
below 0.05. Based on the results of these statistical tests, the first hypothesis which states that there
is a negative effect of company performance on the capital structure of high-tech companies can
be proven empirically. High-tech companies are companies that are still in the development stage
with a high need for investment in high-tech development. Company performance is the company's
ability to earn a profit which is usually referred to as company profitability. The negative
relationship explains that the higher the company's ability to generate profits, the greater the return
returned to investors, meaning that high company returns on investment will use relatively small
debt. most of their funding needs with internally generated funds. Profitability that reflects high
ROA causes higher corporate profits so that more internal cash is owned otherwise the need for
external funds will decrease (Nellson, 2015). The legitimacy theory explains that in order to
maintain the company's continuity, high tech companies seek recognition from various
stakeholders, both from investors, creditors, consumers, the government and the surrounding

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community. In order to gain the trust of investors, the company strives to continuously increase
stock returns for investors. To gain legitimacy from creditors, companies increase their ability to
repay debts. This explains that the higher the company's performance, the higher the stock return
and the ability to repay debt so that the company gains the trust of various stakeholders (Cheers,
2011). The company will experience difficult conditions because its existence is not accepted by
the community which is reflected in the indications of social conflict with the community. the
higher the company's performance, the lower the structure of loan funds in the company and the
higher the financial stability for the company's operational and business interests. (Spitsin et al.,
2021) . Companies with a more dominant capital structure from debt have a higher risk in terms of
liquidity than companies that have capital from shares (Reilly, Frank K & Brown, 2012) .

The Effect of Corporate Growth on the Capital Structure of High-Tech Companies

The results of statistical tests show that the growth of asset growth shows a positive
influence on the company's capital structure with a significance value of 0.007 below 0.05. In
contrast, there is no significant effect of sales growth on the company's capital structure. Research
conducted by (Kwon et al., 2021) explains that sales growth is not significant in high-tech
companies because sales to companies are mostly credit sales so that receivables from creditors do
not consider sales growth in providing credit.The positive influence between growth and short-
term debt is also explained by research conducted by (Da et al., 2021). Meanwhile, several
empirical studies show that there is no positive effect of firm growth on leverage (Gan et al., 2021;
Kuo et al., 2018). The positive influence explains the growth of the company's performance can
also be seen through the growth of assets. Companies that have good indications of growth will
also be followed by an increase in the number of assets. Some assets are also classified as fixed
assets intended for working capital. To achieve high growth targets, companies need assets for
working capital purposes. The increase in assets in high tech companies is a manifestation of the
company's growth. The higher the growth of the company, the greater the need for funds needed
by the company. (Najera Ruiz & Collazzo, 2021).

The Effect of CSR Performance on the Capital Structure of High-Tech Companies

The results of statistical tests show that CSR performance shows a positive and significant
relationship to the company's capital structure with a significance value of 0.034 below 0.05. The
significant effect is stated in the environmental performance which has a significance value of
0.009 below 0.05. The positive relationship above shows the better High-Tech Companies in
proving good CSR performance, can increase public trust to provide access to resources in the form
of capital. Research on CSR performance in high-tech companies was conducted by (Grabinska et
al., 2021) . This study finds that CSR performance is the main factor affecting the company's capital
structure. This indicates that companies that have higher CSR performance can gain access to wider
capital financing from the public as providers of capital. Companies that have received legitimacy
have easier access to resources in the form of capital, access to debt, profitable market potential,
cooperative networks, natural resources, and so on (Fatemi et al., 2018) . According to Branco and
Rodrigues (2021), companies carry out CSR activities concerning securing good relations with key
stakeholders, which leads to the establishment or maintenance of competitive advantage. If a
company discloses CSR information, it can increase investors' interest to invest their shares. Hight
Tech Companies can increase the share of liabilities in the capital structure by adopting a CSR
strategy. The theory of legitimacy plays a role in CSR activities because the community as a wider
social system expects a synergy between companies as corporate social responsibility.

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CONCLUSIONS AND RECOMMENDATIONS

In the digital era, many technology-based startups are growing. As a company engaged in
the field with a high investment structure, high-tech companies are included in the group of
companies that are vulnerable in terms of growth risk. Growing companies need not only financial
capital and human resources, but also social capital as a consequence of the company's existence
as a member of a broad social sub-system (Qiu et al., 2016)
This study examines the factors that influence the capital structure of High-Tech Companies
. The results show that the company's financial performance, company growth, and company CSR
performance have an influence on the capital structure of High-Tech Companies. as a start-up
company engaged in the mastery of technology. As a company that controls high-tech and is in the
process of developing the company, high-tech companies have not shown stable company
performance (Grabinska et al., 2021) . Meanwhile, high-tech companies need sufficient funding to
support their operational activities which are dominated by the use of technology, which of course
requires a large initial investment.
The results of hypothesis testing show that ROA and ROE have a negative effect on the
company's capital structure, while asset growth and CSR performance have a positive effect. Sales
growth has no effect on the company's capital structure. The results of the hypothesis test are in
accordance with the legitimacy theory which states that companies that are not supportive and
cannot understand the rules of the social system tend to have difficulty maintaining aspects of the
company's sustainability (Haseeb et al., 2019) . Disruption of the sustainability aspect, of course,
will affect the company's ability to raise capital from the community, which in turn will affect the
company's capital structure.
This study contributes to the academic community to strengthen the literature review on
legitimacy theory which focuses on aspects of sustainability through the company's capital
structure. Identification of the factors that influence the company's capital structure, especially in
high-tech companies will help practitioners to focus on the determinants in the process of setting
management policies related to capital structure. This study has several weaknesses, including not
considering the company's liquidity conditions when testing the company's performance. This
research still has to be refined by expanding the determinant factors that affect capital structure,
such as corporate governance (Miloud, 2022) .

ACKNOWLEDGEMENTS
We would like to acknowledge the Research Institute and Community Services (LP2M),
Universitas Wahid Hasyim Semarang, for the financial support of this work.

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