Abstract:
Companies i n t elecommunication s ector's pe rformance i s di rectly af fected by t he r apid gr owth of onl ine c ommerce ( ecommerce), with the internet data usage contributing the most significant impact. Profitability is one of financial health
indicators of a company. It can affect capital structure. There are two contradicting theories regarding the effects of capital
structure to company's value, namely: (1) the traditional approach and (2) the theory of Modigliani-Miller (MM). Utilizing
the method of double linear regression analysis with panel data, this study analyzed the influence of profitability on capital
structure. D ata pr ocessing us ing E views software f ound t hat pr ofitability has s ignificant e ffects, s imultaneously an d
partially, on capital structure. In general, the research finding supports the theory of MM which states that company's value
is affected by the company's ability to generate profit and is not affected by capital structure. However, in order to control
its debt ratio, it is also important for a company to keep an optimal capital structure.
