The Effect of Capital Structure and Liquidity on Firm Value Mediated by Profitability

Abstract

The purpose of this study is to examine and prove the effect of capital structure and liquidity on firm value as mediated by profitability. The data used in this study are financial reports and annual reports of infrastructure companies (2014-2018), the sample size is nine companies. The analysis technique used is panel data regression (pooled data), with descriptive statistical analysis, stationarity test, regression model selection, classical assumption test, and hypothesis testing in model suitability test (R2m), individual parameter significance test (t-test), and sobel test done in the Eviews 10. The results of this study indicate that capital structure and liquidity have no effect on firm value. Profitability was found to be unable to mediate the effect of capital structure on firm value, but was able to mediate the effect of liquidity on firm value.

Factor Affecting Firm Value with Profitability as an Intervening Variable in Food & Beverage Sub-Sector Companies Listed on the Indonesia Stock Exchange

“…The results of this study are in line with research that has been conducted by Jannah et al (2022), Sudiyatno et al (2020), Putro & Risman (2021), Muliana &Ikhsani (2019), andPrakoso et al (2022) which states that profitability cannot moderate the influence of capital structure on firm value. However, it is different from research conducted by Wijaya & Pakpahan (2021), Suzulia et al (2020), and Wendy et al (2022), which states that profitability can moderate the influence of capital structure on firm value.…”

“…The results of this study are in line with research that has been conducted by Hidayat et al (2020), andPakpahan (2021), which states that profitability cannot moderate the influence of liquidity on firm value. However, it is different from the research conducted by Sipahutar et al (2021), Wendy et al (2022), andPutro &Risman (2021), which states that profitability can moderate the influence of liquidity on firm value.…”

“…According to Putro & Risman (2021), the capital structure is part of the financial structure that can show a reflection of the balance between long-term debt and equity. One of the most important decisions is regarding the company's ability to meet the needs of funds that will be used for operational activities or for expansion.…”

The Effect of Profitability, Capital Structure and Cash Dividend on Firm Value of Public Non-Financial Companies in Indonesia During the Period Before and During the Covid-19 Pandemic (2018-2021)

“…One of the reasons for the importance of making financial decisions is that in the end, companies need funds to meet their operational and expansion needs, both internal and internal, so companies need to carry out good debt structuring (Putro & Risman, 2021). The capital structure of a firm is a mixture of sources that finance it (Hirdinis, 2019;Ullah et al, 2020).…”

Semi-Strong Efficient Market Hypothesis in Dividend Announcements at Indonesia Stock Exchange (Idx)

“…According to Reilly &Brown (2012), EMH expects security prices to change quickly, making it impossible for investors to achieve better risk-adjusted returns by investing after the public announcement and incurring standard transaction costs. Return is an important decision consideration, whereas (Putro & Risman, 2021) said that return is the most crucial measure for investment decisions; risk and expected earnings (return) from assets are taken into account while making investment decisions (Risman et al, 2017).…”