Journal of Economics, Finance and Management Studies ISSN (print): 2644-0490, ISSN (online): 2644-0504 Volume 5 Issue 12 December 2022 Article DOI: 10.47191/jefms/v5-i12-32, Impact Factor: 6.274 Page No. 3720-3725 JEFMS, Volume 5 Issue 12 December 2022 www.ijefm.co.in Page 3720 Testing of Herding and Capital Structure Decisions on the Indonesia Stock Exchange: An Observation of Infrastructure & Property Firms Ignatius Roni Setyawan 1 , Ishak Ramli 2 , Budi Frensidy 3 1,2 Lecturer of Faculty of Economics & Business, Universitas Tarumanagara, Jl. Tanjung Duren Utara 1, 11470 Jakarta , Indonesia 3 Lecturer of Faculty of Economics & Business, Universitas Indonesia. Kampus UI, Depok, 16424 Jawa Barat Indonesia ABSTRACT: The purpose of this study is to examine the phenomena of herding behavior and capital structure decisions at IDX by taking samples of firms in the infrastructure and property industry sectors in 2018-2021. The basis for determining the research model from Brandea and Pop (2019) which uses panel data regression based on Leary and Robert (2014) research regarding the peer effect motive in herding behavior and capital structure decisions. The results of this study show that there is still herding behavior and capital structure at IDX, especially in infrastructure and property industrial firms with the expansion of findings from Brandea and Pop (2019) that it is not only size as a determining factor but also profit and growth. The implication is that it is still possible for infrastructure and property firms to conduct herding as long as they are able to maintain their optimum capital structure. KEYWORDS: Herding behavior, capital structure decisions, infrastructure & property firms in the IDX I. INTRODUCTION One of the fundamental problems of financial management decisions is to determine the optimal combination of capital structures. Various theories of capital structure, both traditional and behavioral approaches, try to explain the various techniques and determinants of the optimal combination of capital structures. However, the results of the research have been varied and no agreement has been reached on what factors actually determine this optimum combination of capital structures. The research by Brandea and Pop (2019) is based on a behavioral approach that tries to reveal the aspect of manager bias in determining capital structure decisions, namely herding behavior and finds that for the research object of firms listed on the Romanian stock exchange, herding behavior in capital structure decisions occurs and the strongest determining factor is size (firm size). This indicates that financial managers of firms on the Romanian stock exchange are interested in herding behavior in capital structure decisions because they want to give a positive signal to investors and creditors that their firm has more power in terms of fixed assets which are often used as collateral in bank loan applications and bond issuance ratings still good in the eyes of investors, namely bond ratings with a value above BBB+. Meanwhile, several research results in Indonesia still discuss herding and investment decisions and relatively few discuss herding and capital structure (financing) decisions. Considering in the financial management literature that there is a close relationship between investments and financing decisions, the author's research will re-examine herding behavior and capital structure (financing) decisions on the grounds that the stock exchange conditions in Indonesia are the same as those in Romania, namely emerging market and tend to be inefficient. One of the hallmarks of inefficiency is mispricing in IPO (initial Public Offering) cases between firms (prospective issuers); investors and underwriters. This mispricing is very likely to occur by the stock exchange authorities in order to maintain the liquidity of the capital market. With this high liquidity, the firm's willingness to conduct an IPO will always be maintained. Continuing the research from Brandea and Pop (2019), this research will re-examine herding and capital structure decisions using panel data regression which is more directed at one industrial sector which is suspected to have very high herding characteristics on the Indonesian stock exchange, namely infrastructure & property. As is known, this industrial sector includes the most dynamic industrial behavior, namely the actions of the leader firm will trigger the same action from the follower firm. For example, when there is pricing of building materials, determining trends in housing and building models and socializing investment instrument models related to property, such as REITs (Real Estate Investment Trusts) and Proptech which are currently