Capital Structure, Asset Efficiency, And Risk-Adjusted Performance: Evidence From Indonesia’s Coal Mining Sector

This study investigates the role of capital structure and operational efficiency on risk-adjusted performance in the coal mining industry in Indonesia, a sector noted for high leverage, volatile commodity prices, and macroeconomic risk. Using balanced panel data from 19 publicly listed coal companies over the period 2015 – 2024, we estimate fixed-effects models to examine the effects of Debt-to-Equity Ratio (DER) and Total Asset Turnover (TATO) on Risk-Adjusted Return on Capital (RAROC), using firm-level risk, measured by the rolling standard deviation of Return on Assets (ROA), as a mediator and firm size as a moderator. The results of this study demonstrate that DER negatively impacts RAROC, and TATO positively impacts RAROC. Firm-level risk partially mediates the effect of operational efficiency (TATO) on RAROC, accounting for approximately 21% of the total effect, but does not mediate the relationship between capital structure (DER) and RAROC. Finally, firm size moderated both relationships: first, firm size buffers the negative impact of DER; while, against expectations, firm size weakens the positive impact of TATO on RAROC. Volatility in the exchange rate increases firm risk; and there is no direct effect of macroeconomic variables on performance. These outcomes contribute to understanding risk-adjusted performance and capital structure in emerging markets, and have practical implications for managing financing strategies in an uncertain world.