The Role of Capital Structure and Investment Decisions in Enhancing Financial Performance

Abstract

This study examines the effect of capital structure and investment decisions on the
financial performance of state-owned enterprises (SOEs) in the manufacturing
sector, with PT Krakatau Steel (Persero) Tbk as the case study. Using a quantitative
approach with descriptive and verificative methods, the research analyzes secondary
data from the company’s annual financial reports for the 2020–2024 period. Data
were processed using multiple linear regression with SPSS. The results show that
capital structure, measured by the Debt to Equity Ratio (DER), has a negative and
significant effect on financial performance, while investment decisions, measured by
the Capital Expenditure to Total Assets ratio (CAPEX/TA), have a positive and
significant effect. Simultaneously, both variables significantly influence financial
performance, represented by Return on Assets (ROA). These findings suggest that
maintaining an optimal balance between debt and equity and making prudent
investment decisions are essential for improving financial performance and
competitiveness.