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Profitability, Growth Opportunity, Capital Structure and The Firm Value

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  • Sri Hermuningsih

Abstract

This paper examines the influence of profitability, growth opportunity, and capital structure on firm value. We apply Structural Equation Model (SEM) on 150 listed companies on the Indonesia Stock Exchange during 2006 to 2010. The result shows that profitability, growth opportunity and capital structure positively and significanctly affect the company’s value. Secondly, the capital structure intervene the effect of growth profitability on company’s value, but not for profitability.

Suggested Citation

  • Sri Hermuningsih, 2013. "Profitability, Growth Opportunity, Capital Structure and The Firm Value," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 16(2), pages 115-136, October.
    • Handle: RePEc:idn:journl:v:16:y:2013:i:2f:p:115-136
    DOI: https://doi.org/10.21098/bemp.v16i2.440
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    References listed on IDEAS

    as
    1. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
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    More about this item

    Keywords

    Profitability; Growth Opportunitiy; Capital Structure; Firm Value; SEM;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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