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Determinants of Capital Structure and Their Effect to Company’s Value: Study in LQ 45 Companies Listed in Indonesia Stock Exchange

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  • Andi Kartika
  • Sunarto Sunarto
  • Faisal Riza Rahman
  • Zaky Machmuddah

Abstract

The aim of the research is to analyse the effect of profitability, liquidity, and company’s size to company’s value and examines whetherDERis a mediating variable. Secondary data is taken from annual report of the companies. Analysis method used is multiple regression analysis (least square). The finding of the research showed thatDER mediated the relationship between CR andTobin’s Q. However DER is not a mediating variable for the relationship betweenRNOAand TOBINas well as between SIZE and Tobin’s Q. Mediating test is conducted by Sobel Test. The other finding is that RNOA positively affects to DER. CR negatively affects to DER. SIZE positively affects to DER and then DER negatively affects to Tobin’s Q. Recommendation for future research is to widen the samples, not just 42 companies, to add observed periods to give clearer description in long term.The next research can also use other dependent variables affecting capital structure and company’s value.

Suggested Citation

  • Andi Kartika & Sunarto Sunarto & Faisal Riza Rahman & Zaky Machmuddah, 2020. "Determinants of Capital Structure and Their Effect to Company’s Value: Study in LQ 45 Companies Listed in Indonesia Stock Exchange," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 9, May.
    • Handle: RePEc:bjz:ajisjr:1904
    DOI: https://doi.org/10.36941/ajis-2020-0051
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    References listed on IDEAS

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    1. Songul KAKILLI ACARAVCI, 2015. "The Determinants of Capital Structure: Evidence from the Turkish Manufacturing Sector," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 158-171.
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