Capital Structure, Profitability, and Firm Value: Does Firm’s Dividend Policy Matter? Evidence from Telecommunication Industry

Abstract

Using dividend policy as a moderating variable, the purpose of this study is to examine the factors that determine the value of a firm, focusing on the capital structure and profitability of the telecommunications industry listed on the IDX from 2016 to 2020. The findings of this study show that capital structure and profitability have a positive and statistically significant impact on the value of a company. However, our hypothesis which suggests that dividend policy moderates the link between capital structure and company value cannot be supported. In contrast, we document that dividend policy can influence the link between profitability and business value, with favorable and statistically significant outcome. This study implies that telecommunication industry does not consider dividend policy as material factor to boost the company value with any form of capital structure chosen by the firms.