THE INFLUENCE OF MACROECONOMIC FACTORS ON CAPITAL STRUCTURE THROUGH PROFITABILITY: A CASE STUDY OF COMPANIES LISTED IN THE SET 100 INDEX

Abstract

This study investigates the influence of macroeconomic factors, namely gross domestic product (GDP) growth, inflation, and the policy interest rate, on the capital structure of firms listed in the SET100 index, as measured by the debt-to-equity ratio, with profitability, measured by return on equity, examined as a mediating variable. The sample comprises an unbalanced quarterly panel dataset of SET100-listed companies, excluding those in the financial sector, spanning the period from 2017 to 2025 and totaling 2,476 firm-quarter observations. The data were analyzed using path analysis in JASP, complemented by a 5,000-resample bootstrapping procedure following Hayes' approach, with firm size controlled for throughout the model. The findings indicate that GDP growth exerts a significant positive effect on profitability, whereas the policy interest rate exerts a significant negative effect; inflation, by contrast, shows no statistically significant effect. Profitability is further found to exert a significant negative effect on capital structure, while none of the three macroeconomic factors exhibits a direct effect on capital structure. The mediation analysis confirms that profitability fully mediates the relationships between GDP growth and capital structure and between the policy interest rate and capital structure, whereas no significant mediating effect is observed for inflation. Taken together, these findings suggest that macroeconomic conditions influence corporate capital structure primarily through their effect on profitability rather than through a direct channel, a result that carries meaningful implications for corporate financial planning and for the formulation of economic policy amid ongoing macroeconomic volatility.

Keywords: Capital Structure, Profitability, Macroeconomic Factors, Mediation Analysis, SET100