The Effect Of Capital Structure And Profitability On Company Value With Growth In The Growth Of Moderating In Manufacturing Companies In The Consumer Goods Industry Sector In The Indonesia Stock Exchange For The 2010-2014 Period
The Effect of Capital Structure and Profitability on Company Value with Growth in the Growth of Moderating in Manufacturing Companies in the Consumer Goods Industry Sector in the Indonesia Stock Exchange for the 2010-2014 Period
Understanding Complex Relationships
In the world of finance, two key factors that can significantly impact a company's value are capital structure and profitability. Capital structure, which refers to the proportion of debt financing and equity in company funding, can affect the risk and profitability of the company. On the other hand, profitability, measured by the ratio of profits, shows the company's ability to generate profits from its operations. However, the relationship between capital structure, profitability, and company value is not always linear. Company growth can be an important variable that moderates this relationship.
Companies that grow quickly may be able to use leverage (debt) more effectively to fund their growth, which in turn can increase the value of the company. Conversely, companies with slow growth may be better with a more conservative capital structure to avoid excessive financial risks. This complex relationship between capital structure, profitability, and company value is the focus of this study.
Research Methodology
This study uses secondary data in the form of financial statements from 31 Consumer Goods Industry Companies registered in the Indonesia Stock Exchange (IDX) for the 2010-2014 period. Purposive sampling was used to select 13 companies that meet the research criteria. The data were analyzed using multiple regression techniques and the analysis of thermoderation regression (MRA) with a significance level of 5%.
Research Results and Implications
The results of this study show that:
- Partially, the capital structure has no influence on company value, while profitability has a positive and significant influence on company value.
- Simultaneously, capital structure and profitability have a positive and significant influence on company value.
- Interaction between company growth and capital structure has a negative and significant influence on company value. This shows that companies that grow fast tend to experience a decline in company value if using too much leverage.
- Interaction between company growth and profitability has a positive and significant influence on company value. This indicates that companies that grow fast with high profitability tend to have a higher company value.
The results of this study have important implications for investors, company management, and regulators:
Investor
Investors can use the findings of this research to assess the company based on the capital structure, profitability, and growth. Companies with high profitability and rapid growth, despite having a high leverage, have the potential to provide added value for investors.
Company Management
Company management can use the findings of this research to optimize their capital structure and growth strategy to increase company value. It is essential to balance the use of leverage with the company's growth rate so as not to get caught up in excessive financial risk.
Regulator
The findings of this research can be a consideration for regulators in developing policies that support company growth and increase company value in the capital market.
Conclusion
This study shows that the capital structure and profitability have a significant influence on the company's value, but the effect is influenced by company growth. Company growth can strengthen or weaken the relationship between capital structure, profitability, and company value. It is essential for investors, company management, and regulators to understand the complexity of this relationship in order to make appropriate decisions and increase company value in the capital market.
Limitations and Future Research Directions
This study has some limitations, including the use of secondary data and the limited sample size. Future research can focus on using primary data and a larger sample size to provide more robust results. Additionally, future research can explore the impact of other factors, such as industry trends and market conditions, on the relationship between capital structure, profitability, and company value.
Conclusion
In conclusion, this study provides valuable insights into the complex relationship between capital structure, profitability, and company value. The findings of this study have important implications for investors, company management, and regulators, and highlight the need for a more nuanced understanding of the factors that influence company value. By understanding the interplay between capital structure, profitability, and company growth, investors, company management, and regulators can make more informed decisions and increase company value in the capital market.
Frequently Asked Questions (FAQs) about the Effect of Capital Structure and Profitability on Company Value
Q: What is the main focus of this study?
A: The main focus of this study is to examine the effect of capital structure and profitability on company value, with company growth as a moderating variable in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) for the 2010-2014 period.
Q: What is the significance of capital structure in company value?
A: Capital structure refers to the proportion of debt financing and equity in company funding. It can affect the risk and profitability of the company, and therefore, has a significant impact on company value.
Q: How does profitability affect company value?
A: Profitability, measured by the ratio of profits, shows the company's ability to generate profits from its operations. A high profitability can lead to a higher company value.
Q: What is the role of company growth in moderating the relationship between capital structure, profitability, and company value?
A: Company growth can strengthen or weaken the relationship between capital structure, profitability, and company value. Companies that grow quickly may be able to use leverage (debt) more effectively to fund their growth, which in turn can increase the value of the company.
Q: What are the implications of this study for investors?
A: Investors can use the findings of this research to assess the company based on the capital structure, profitability, and growth. Companies with high profitability and rapid growth, despite having a high leverage, have the potential to provide added value for investors.
Q: What are the implications of this study for company management?
A: Company management can use the findings of this research to optimize their capital structure and growth strategy to increase company value. It is essential to balance the use of leverage with the company's growth rate so as not to get caught up in excessive financial risk.
Q: What are the implications of this study for regulators?
A: The findings of this research can be a consideration for regulators in developing policies that support company growth and increase company value in the capital market.
Q: What are the limitations of this study?
A: This study has some limitations, including the use of secondary data and the limited sample size. Future research can focus on using primary data and a larger sample size to provide more robust results.
Q: What are the future research directions?
A: Future research can explore the impact of other factors, such as industry trends and market conditions, on the relationship between capital structure, profitability, and company value.
Q: What are the practical implications of this study?
A: The findings of this study have practical implications for investors, company management, and regulators. By understanding the interplay between capital structure, profitability, and company growth, investors, company management, and regulators can make more informed decisions and increase company value in the capital market.
Q: What are the contributions of this study?
A: This study contributes to the existing literature on the relationship between capital structure, profitability, and company value. It provides new insights into the moderating effect of company growth on this relationship and highlights the importance of considering company growth in assessing company value.
Q: What are the future applications of this study?
A: The findings of this study can be applied in various contexts, such as investment analysis, corporate finance, and regulatory policy-making. It can also be used as a reference for future research on the relationship between capital structure, profitability, and company value.