Page 74 - SUSTAINABILITY ISSUES & COVID-19

Table 6 Hofstede’s cultural dimensions – Countries comparison
Country Power Distance Uncertainty Avoidance Individualism
Indonesia 78 48 14
Malaysia 100 36 26

Filipina 94 44 32
Singapura 74 8 20
Thailand 64 64 20

Power distance’s dimension shows the hierarchy in the social system, the higher the value, the more centralized the
leadership system. Malaysia and the Philippines have very high scores, even reaching one hundred, and Thailand
occupies the lowest position. Even so, this value is still considered relatively high, even higher than in Japan and South
Korea. Singapore is a country with the lowest uncertainty avoidance dimension, meaning that the country is very
open to uncertainty and flexibility is the main key in dealing with uncertainty. Thailand, which has the lowest power
distance value, has the highest uncertainty avoidance value. The relationship between power distance and uncertainty
avoidance reflects the attitudes towards risk. The stronger the centralized system in an organization, the greater the
exposure to overconfidence attitudes. The differences in characters of every country in this study might affect the result
for the effect of corporate strategies to its capital structure. It might also affect the role of CEO overconfidence as the
moderated variables to strengthen or weaken the corporate strategies’ effect on capital structure. Hopefully, for the
next study, the alternative explanation could be fully elaborated and could give a wider perspective.

The asset structure variable has a significant negative effect on capital structure, in contrast to the initial hypothesis.
Joveer (2013) explains that for countries undergoing a transition, the correlation between the two tends to be negative.
The profitability variable has a positive influence on capital structure, in contrast to the initial hypothesis. In the theory
of trade-off companies that have high profitability tend to increase their debt, the results of research conducted by
Khémiri & Noubbigh (2018).

6. CONCLUSION

The results of the Philippines sample regression show that the company’s strategy that shows management preferences
also affects its capital structure. Preventive strategies such as vertical interpretation tend to have lower leverage,
while companies that implement risk seeker strategies such as diversification and internationalization will increase
their leverage. CEO overconfidence with a perception bias makes the company with a high tolerance for risk and
implementing aggressive strategies such as diversification and internationalization, will be more aggressive on using
debt as their external financial resource. The result could vary in every country, the cultural aspect as explained before
might explain why the result could be different from one to another.

In this study, there are still some limitations related to the specification of sample determination including the
industrial sector and the ownership status of the company where it can make the association of independent variables
on leverage not in accordance with the hypothesis.

International Conference on Sustainability 73
(5 Sustainability Practitioner Conference)
Th