Profitability and liquidity on firm value and capital structure as intervening variable

  • Ida Ayu Gede Dika Martami Sari Udayana University, Denpasar, Indonesia
  • Ida Bagus Panji Sedana Udayana University, Denpasar, Indonesia
Keywords: capital structure, firm value, liquidity, profitability, signaling theory

Abstract

This study aims to determine the effect of profitability and liquidity on firm value and determine the role of capital structure in mediating the effect of profitability and liquidity on firm value in the construction and building sub-sector companies listed on the Indonesia Stock Exchange (IDX) for the period 2013-2017. The population in this study are construction and building sub-sector companies that are listed on the Indonesia Stock Exchange and have complete financial statements for the period 2013-2017. This study uses samples with the census method. The data analysis technique used is path analysis. Profitability has a positive and significant effect on capital structure, Liquidity has a negative and significant effect on capital structure, capital structure has a positive and significant effect on firm value, profitability has a positive and significant effect on firm value, liquidity has a negative and not significant effect on firm value and capital structure is able to mediate the effect of profitability and liquidity on firm value.

Downloads

Download data is not yet available.

References

Acaravci, S. K. (2015). The determinants of capital structure: Evidence from the Turkish manufacturing sector. International Journal of Economics and Financial Issues, 5(1), 158-171.

Aggarwal, D., & Padhan, P. C. (2017). Impact of capital structure on firm value: evidence from Indian Hospitality Industry. Theoretical Economics Letters, 7(04), 982. https://doi.org/10.4236/tel.2017.74067

Akben Selçuk, E. (2015). Corporate diversification and firm value: evidence from emerging markets. International Journal of Emerging Markets, 10(3), 294-310. https://doi.org/10.1108/IJoEM-12-2012-0180

Akpinar, O. (2016). Factors affecting capital structure: a panel data analysis on borsa istanbul. Economic and Social Development: Book of Proceedings, 527.

Andawasatya, R., Indrawati, N. K., & Aisjah, S. (2017). The effect of growth opportunity, profitability, firm size to firm value through capital structure (study at manufacturing companies listed on the Indonesian stock exchange). Imperial Journal of Interdisciplinary Research, 3(2), 1887-1894.

Andres, C., Cumming, D., Karabiber, T., & Schweizer, D. (2014). Do markets anticipate capital structure decisions?—Feedback effects in equity liquidity. Journal of Corporate Finance, 27, 133-156. https://doi.org/10.1016/j.jcorpfin.2014.02.006

Basuki, A. T., & Prawoto, N. (2016). Analisis regresi dalam penelitian ekonomi & bisis (dilengkapi aplikasi SPSS & eviews).

Batten, J., & Vo, X. V. (2019). Liquidity and firm value in an emerging market. The Singapore Economic Review, 64(02), 365-376. https://doi.org/10.1142/S0217590817470063

Bhattacharya, S. (1979). Imperfect information, dividend policy, and “the bird in the hand” fallacy. Bell journal of economics, 10(1), 259-270.

Cheryta, A. M., & Moeljadi, D. N. K. A. (2017). The effect of leverage, profitability, information asymmetry, firm size on cash holding and firm value of manufacturing firms listed at Indonesian Stock Exchange. International Journal of Research in Business Studies and Management, 4(4), 21-31. https://dx.doi.org/10.26905/jkdp.v22i1.1334

Cheung, W. M., Chung, R., & Fung, S. (2015). The effects of stock liquidity on firm value and corporate governance: Endogeneity and the REIT experiment. Journal of Corporate Finance, 35, 211-231. https://doi.org/10.1016/j.jcorpfin.2015.09.001

Ernayani, R., & Sari, O. (2017). The effect of return on investment, cash ratio, and debt to total assets towards dividend payout ratio (a study towards manufacturing companies listed in Indonesia stock exchange). Advanced Science Letters, 23(8), 7196-7199. https://doi.org/10.1166/asl.2017.9328

Fajaria, A. Z., & Isnalita, N. I. D. N. (2018). The Effect of Profitability, Liquidity, Leverage and Firm Growth of Firm Value with its Dividend Policy as a Moderating Variable. International Journal of Managerial Studies and Research (IJMSR), 6(10), 55-69.

Farooq, M. A., & Masood, A. (2016). Impact of financial leverage on value of firms: Evidence from cement sector of Pakistan. Research Journal of Finance and Accounting, 7(9), 73-77.

Fumani, M., & Moghadam, A. (2015). The Effect of Capital Structure on Firm Value, The Rate of Return on Equity and Earnings Per Share of Listed Companies in Tehran Stock Exchange. Journal of Finance and Accounting, 6(15).

Ghasemi, M., & Ab Razak, N. H. (2016). The Impact of Liquidity on the Capital Structure: Evidence from Malaysia. International journal of economics and finance, 8(10), 130-139. http://dx.doi.org/10.5539/ijef.v8n10p130

Habib, H., Khan, F., & Wazir, M. (2016). Impact of debt on profitability of firms: Evidence from non-financial sector of pakistan. City University Research Journal, 6(01).

Hamidah, H., Iswara, D., & Mardiyati, U. (2016). The effect of profitability, liquidity, growth sales, operating leverage and tangibility on capital structure (evidence from manufacture firm listed on Indonesia stock exchange in 2011-2014). JRMSI-Jurnal Riset Manajemen Sains Indonesia, 7(1), 96-116. https://doi.org/10.21009/JRMSI.007.1.06

Handriani, E., & Robiyanto, R. (2018). Corporate finance and firm value in the Indonesian manufacturing companies. International Research Journal of Business Studies, 11(2), 113-127. https://doi.org/10.21632/irjbs

Harjito, D. A., & Martono, S. U. (2014). Manajemen Keuangan Edisi Kedua. Yogyakarta: Ekonisia.

Hasbi, H. (2015). Islamic microfinance institution: the capital structure, growth, performance and value of firm in Indonesia. Procedia-Social and Behavioral Sciences, 211, 1073-1080. https://doi.org/10.1016/j.sbspro.2015.11.143

Hossain, I., & Hossain, A. (2015). Determinants of capital structure and testing of theories: A study on the listed manufacturing companies in Bangladesh. International Journal of Economics and Finance, 7(4), 176-190. https://doi.org/10.5539/ijef.v7n4p176

Jones, C. P. (2010). Investments: Principles and concepts. Wiley.

Koh, A., Ang, S. K., Brigham, E. F., & Ehrhardt, M. C. (2014). Financial management: theory and practice. Cengage Learning.

Liang, J., Fang Li, L., & Song, H. S. (2014). An explanation of capital structure of China's listed property firms. Property Management, 32(1), 4-15. https://doi.org/10.1108/PM-02-2013-0012

Masulis, R. W. (1983). The impact of capital structure change on firm value: Some estimates. The journal of finance, 38(1), 107-126. https://doi.org/10.1111/j.1540-6261.1983.tb03629.x

Megginson, D. (1996). Planned and emergent learning: consequences for development. Management learning, 27(4), 411-428. https://doi.org/10.1177%2F1350507696274002

Naseer, M., & Naseem, I. (2015). The relationship between working capital management and cash holdings of banks in Pakistan. IUP Journal of Bank Management, 14(2), 7.

Osazuwa, N. P., & Che-Ahmad, A. (2016). The moderating effect of profitability and leverage on the relationship between eco-efficiency and firm value in publicly traded Malaysian firms. Social Responsibility Journal, 12(2), 295-306. https://doi.org/10.1108/SRJ-03-2015-0034

Pervaiz, Y., Zaman, A., Salam, S. A., & Bilal, M. (2013). Impact of Liquidity on Capital Structure of Textile Sector of Pakistan. Journal of Economics & Finance (JEF), 1(6).

Purwohandoko. (2017). “The Influence of Firm’s Size, Growth and Profitability of Firm Value with Capital Structure as The Mediator: A Study on The Agricultural Firms Listed in The Indonesian Stock Exchange”. International Journal of Economics and Finance. Vol. 9, No. 8, pp. 103-110. ISSN: 1916-971X. E-ISSN: 1916-9728. Published by Canadian Center of Science and Education.

Putra, I. G. W. R., & Sedana, I. B. P. (2019). Capital structure as a mediation variable: Profitability and liquidity on company value in real estate companies in Indonesia stock exchange. International Research Journal of Management, IT and Social Sciences, 6(4), 62-72. https://doi.org/10.21744/irjmis.v6n4.640

Ramadan, I. Z. (2015). An empirical investigation of the trade-off theory: Evidence from Jordan. International Business Research, 8(4), 19-24. https://doi.org/10.5539/ibr.v8n4p19

Ross, S. A. (1977). The determination of financial structure: the incentive-signalling approach. The bell journal of economics, 23-40.

Sabrin, A., Sarita, B., Takdir, D., & Sujono, C. (2016). The effect of profitability on firm value in manufacturing company at Indonesia Stock Exchange. The International Journal of Engineering and Science, 5(10), 81-89.

Smith Jr, C. W., & Watts, R. L. (1992). The investment opportunity set and corporate financing, dividend, and compensation policies. Journal of financial Economics, 32(3), 263-292. https://doi.org/10.1016/0304-405X(92)90029-W

Tahu, G. P., & Susilo, D. D. B. (2017). Effect of Liquidity, Leverage and profitability to The Firm Value (Dividend Policy as Moderating Variable) in Manufacturing Company of Indonesia Stock Exchange. Research Journal of Finance and Accounting, 8(18), 2222-1697.

Yanti, N. M. Y. W. A., & Dwirandra, A. (2019). The effect of profitability in income smoothing practice with good corporate governance and dividend of payout ratio as a moderation variable. International Research Journal of Management, IT and Social Sciences, 6(2), 12-21. https://doi.org/10.21744/irjmis.v6n2.601

Younus, S., Ishfaq, K., Usman, M., & Azeem, M. (2014). Capital structure and financial performance: Evidence from Sugar industry in Karachi Stock Exchange Pakistan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(4), 272-279.

Zeb, A., Khan, S., & Iqbal, M. (2016). Effect of Liquidity and Capital Structure on Financial Performance: Evidence from banking Sector. Significance, 6(7).

Zheng, Y. (2017). Three Essays on Capital Structure and Product Market Interactions.

Zuhroh, I. (2019). The Effects of Liquidity, Firm Size, and Profitability on the Firm Value with Mediating Leverage. KnE Social Sciences, 203-230.

Published
2020-01-09
How to Cite
Sari, I. A. G. D. M., & Sedana, I. B. P. (2020). Profitability and liquidity on firm value and capital structure as intervening variable. International Research Journal of Management, IT and Social Sciences, 7(1), 116-127. https://doi.org/10.21744/irjmis.v7n1.828
Section
Research Articles