Abstract

The primary aim of the study is to identify the effect of the power of the market on leverage. In addition, this study further takes into account different firm characteristics in the analysis. In this regard, the focus of the study is on Indonesian manufacturing companies. Therefore, secondary quantitative data were obtained ranging from 2014 to 2017 of 50 Indonesian companies operating in the manufacturing sector. This makes a total of 198 observations. In order to analyze the model and attain the research aim, pooled OLS regression has been used due to the absence of panel effects. The results revealed that market power and leverage are positively related to each other and this implies that increment in market power would lead to an improvement in the gearing position of the companies operating in the Indonesian manufacturing sector. Therefore, it has been recommended to consider the measures that can result in enhanced market power.