Int. J Sup. Chain. Mgt Vol. 9, No. 5, October 2020 1584 Supply Chain Management, Firm Size and Intellectual Capital Models to Predict Capital Structure and Profitability in the Manufacturing Industry Stefani Chandra 1 , Evelyn Wijaya 2 , Harry P.Panjaitan 3 , Layla Hafni 4 , Jennifer Chandra 5 1.2.3.4. Institut Bisnis dan Teknologi Pelita Indonesia 5. Victoria University 1. stefani.chandra@lecturer.pelitaindonesia.ac.id, 2. evelyn.wijaya@lecturer.pelitaindonesia.ac.id, 3. harry.patuan@lecturer.pelitaindonesia.ac.id, 4. layla.hafni@lecturer.pelitaindonesia.ac.id, 5. jennifer.chandra@live.vu.edu.au Abstract- The implementation of supply chain management is necessary to support a company’s operational activities especially in the manufacturing industry. Capital structure is part of the supply chain strategy that plays an important role in funding decision making in effort to boost company profitability. This study aims to analyze the effect that supply chain management, firm size and intellectual capital have on the capital structure and profitability in the manufacturing industry. The population in this study was all manufacturing industries registered in the Indonesia Stock Exchange (BEI) of 145 companies. 96 companies from the period 2010-2018 were taken as the sample using the purposive sampling technique. Data in this study were analyzed using path analysis with AMOS software. The results showed that supply chain management dan firm size had no significant effect on capital structure and profitability, while intellectual capital negatively affected capital structure but had a significant positive effect on profitability, and capital structure had a significant negative effect on profitability. The results are in agreement with the pecking order theory stating that a company capable of gaining high profits tends to have low corporate debt. Keywords: supply chain management, Firm Size, Intellectual Capital, Profitability, Manufacturing Industry 1. Introduction Supply chains are principally concerned with the flow of products and information between supply chain member organizations—procurement of materials, transformation of materials into finished products, and distribution of those products to end customers. Today’s information-driven, integrated supply chains are enabling organizations to reduce inventory and costs, add product value, extend resources, accelerate time to market, and retain customers. Company capital structure is one of fundamental factors in company operations. Capital structure is determined by the spending policies put forward by financial managers that constantly wrestle with various deliberations both qualitative or quantitative ones. Every company needs funds to keep their operational activities running which can be acquired from the owner's capital or from other parties in the form of debts. Debts are often treated as one of the more appealing funding sources for a company compared to other external funding sources such as stocks, bonds and other securities. Indonesia has been known as a country with stable economic growth and great investment climate. This condition fosters enough trust in business actors to make investments. One form of expansions by business actors are the increasing value of debt, especially foreign debt. Since 2012, private company foreign debts tend to be higher than the government foreign debts. Private debts saw a significant increase of 127.48% since 2010, while the government debts saw 56.97% increase since the same year. The optimism of business actors towards Indonesia's strong economic fundamental condition has pushed them to expand their businesses by increasing debt as a source of corporate financing. Out of the 3 sectors in the Indonesia Stock Exchange, namely primary sector, manufacturing sector and service sector, the manufacturing sector emerges as a key sector in spurring national economy. The manufacturing sector can boost domestic raw material value-added, absorb labor, generate foreign exchange from exports and become the biggest contributor to taxes and excise. The manufacturing value-added (MVA) value of Indonesia in 2018 reached 4.84%. Globally, Indonesia’s manufacturing sector is ranked 9th among countries in the world. This condition is possible due to the fact that Indonesia has been inducted into one trillion-dollar club, the only country so far in ASEAN to manage that feat [1-9]. ______________________________________________________________ International Journal of Supply Chain Management IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print) Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/) brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by ExcelingTech Publishing Company (E-Journals)