Cost of capital and firm value: Evidence from Indonesia

Kurniasih, Augustina; Rustam, M.; Heliantono,; Endri, Endri

doi:10.21511/imfi.19(4).2022.02

Cited by 10 publications

(6 citation statements)

References 42 publications

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“…However, in the case of negative effect, the findings of this study are consistent with the results of some previous studies, including Majumdar and Chhibber (1999), Gleason et al (2000), Le and Phan (2017), Vo and Ellis (2017), and Qayyum and Noreen (2019). Moreover, in the case of both the positive and negative effects of both leverage and capital structure on financial performance, the findings in our paper support the findings in Bandyopadhyay and Barua (2016), Jaisinghani and Kanjilal (2017), Endri, Ridho, et al (2021), Endri, Supeni, et al (2021), andKurniasih et al (2022).…”

Section: Discussionsupporting

confidence: 92%

“…The authors find that liquidity, profitability, and oil prices negatively affect leverage, while companies' size does not impact leverage. Kurniasih et al (2022) analyse the effect of the cost of capital and capital structure on firm value. It documents that the cost of debt (COD) and cost of equity (COE) negatively and positively affect firm value.…”

Section: Related Work On Capital Structure and Firm Performancementioning

confidence: 99%

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Enhancing Financial Performance and Market Acceptance Through Golden Ratio-Based Capital Structure Decisions: An Empirical Investigation in the Manufacturing and Services Sectors

Khan,

Zada,

Wong

2023

AAMJAF

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The discovery of the golden ratio and the development and the theory for the golden ratio in modern science have witnessed the use of the ratio across many fields, including business, economics and finance. However, the ratio has rarely been used in solving corporate problems, such as fundamental analysis and capital structure decisions. To bridge the gap in the literature, in this paper, we examine the role of the golden ratio in deciding the capital structure and its effect on the firm’s financial performance and market acceptance for the manufacturing and services sector listed on the Pakistan Stock Exchange for the period from 2010 to 2019. In our analysis, we find a significant association between the deviation from the capital structure and the variation of the firm’s financial performance and market acceptance by using the golden ratio. The empirical findings of this study suggest that the golden ratio is an efficient tool for measuring capital structure and is useful for firms to boost financial performance and market acceptance. In general, the findings in our paper suggest financial managers of both the manufacturing and services sectors use a 38.2% ratio of equity and 61.8% of debt at the capital structure level. To the best of our knowledge, no prior studies in the literature have examined the role of the golden ratio in deciding an optimal level of capital structure in Pakistan. Therefore, our paper has a significant contribution to the existing literature, and the empirical findings of the study are found strong and more evident for manufacturing than the services sector. Moreover, the findings in our paper also suggest managers in Pakistan apply the aforementioned percentage of debt and equity in capital structure level subject to performance measurement.

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Section: Discussionsupporting

confidence: 92%

Section: Related Work On Capital Structure and Firm Performancementioning

confidence: 99%

Enhancing Financial Performance and Market Acceptance Through Golden Ratio-Based Capital Structure Decisions: An Empirical Investigation in the Manufacturing and Services Sectors

Khan,

Zada,

Wong

2023

AAMJAF

View full text Add to dashboard Cite

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“…They reported no moderation effect of interest rate.In contrast, Hussain et al [27] reported that firm size and interest rate are good moderators of capital structure. Kurniasih and Rustam [28] examined the influence of CS as a moderator between the cost of capital and FV in Indonesian companies. They found a quasi-role of capital structure as a moderator.…”

Section: Other Moderation Effectsmentioning

confidence: 99%

Firm Value and Profitability of Saudi Arabian Companies Listed on Tadawul: Moderating Role of Capital Structure

Fatima¹,

Shaik²,

Tripathy³

2023

IJSDP

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The impact of profitability on firm value was always been a matter of great interest for financial managers, because the objective of a company is to increase its value and on the other hand the investors expect higher returns on their investment. Therefore, the purpose of present research is to investigate the impact of profitability on firm value moderated with capital structure in different Saudi Arabian companies. The profitability is measured in terms of ROA (Return on Assets) and ROE (Return on Equity), firm value is calculated using Tobin's Q. Capital structure is measured with the debt-equity ratio. The study selects different companies listed on Tadawul as a sample and the study period starts in 2013 and ends in 2020. To analyze the data collected from the annual reports of listed companies, the study reports results by employing panel regression with FE and RE model, and panel GMM. The analyzed results report a positively significant impact of profitability on firm value and a negative and significant effect of capital structure on firm value in all the estimated models. Further, the capital structure interacts as a moderator between profitability and firm value, where the study finds a negatively significant effect of profitability on firm value after moderation. The results strengthen the moderation of capital structure between profitability and firm value.

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“…The company will choose the next source of funding from debt where the debt has a lower risk compared to issuing new shares (Fama and French, 2002). Besides having benefits such as tax protection, choosing debt as a source of funding can also increase the company's net profit (Kurniasih et al, 2022). The increasing net profit has an impact on the increase in stock prices and company value.…”

Section: Panel Data Regression Model Estimationmentioning

confidence: 99%

Biodiesel and Stock Prices: Evidence of Oil Palm Plantation Companies in Indonesia

Endria¹,

Riyani²,

Mardiah³

2022

IJSSHR

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This study examines the effect of the biodiesel program factor 20, return on assets (ROA), and debt to equity ratio (DER) on the stock prices of companies in the oil palm plantation sub-sector for the period 2016-2021. The selected research sample is seven oil palm plantation sector companies listed on the Stock Exchange Indonesian Effect (IDX) Panel data regression method was applied to estimate and analyze the research model. The results showed that return on assets (ROA), and debt to equity ratio (DER) have a positive effect but no significance on stock price, while the program of biodiesel 20 does not affect the stock price.

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Cost of capital and firm value: Evidence from Indonesia

Cited by 10 publications

References 42 publications

Enhancing Financial Performance and Market Acceptance Through Golden Ratio-Based Capital Structure Decisions: An Empirical Investigation in the Manufacturing and Services Sectors

Enhancing Financial Performance and Market Acceptance Through Golden Ratio-Based Capital Structure Decisions: An Empirical Investigation in the Manufacturing and Services Sectors

Firm Value and Profitability of Saudi Arabian Companies Listed on Tadawul: Moderating Role of Capital Structure

Biodiesel and Stock Prices: Evidence of Oil Palm Plantation Companies in Indonesia

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