Effect of profitability, liquidity, and company size on  capital structure: Evidence from Indonesia manufacturing companies

Suhardjo, Yohanes; Karim, Abdul; Taruna, M. Sigit

doi:10.14710/dijb.5.1.2022.70-78

Cited by 5 publications

(6 citation statements)

References 7 publications

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“…The findings of the data analysis conducted in this study suggest that the companies included in the sample exhibit a positive correlation between asset size and profitability, which means that the higher the size of the company the higher the profitability of a company. The findings of this study corroborate the outcomes of previous research conducted by (Aydın Unal et al, 2017;Hamidah & Umdiana, 2017;Karim et al, 2023), which argue that the size of a company exerts a positive and statistically significant impact on its profitability.…”

Section: Firm Size Effect On Profitabilitysupporting

confidence: 89%

“…The correlation between size of a company and profitability has been the subject of prior research, revealing a positive and statistically significant association (Aydın Unal et al, 2017;Hamidah & Umdiana, 2017;Karim et al, 2023). In contrast, alternative research findings suggest that the scale of a company has a detrimental and statistically significant impact on its profitability (Hirdinis, 2019;Niresh & Velnampy, 2014).…”

Section: Introductionmentioning

confidence: 99%

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Effect of Green Accounting, Leverage, Firm Size on Firm Value With Profitability as Intervening Variable

Hutabarat

2024

J. Professional Business Review

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Purpose: This study investigates how green accounting practices, leverage (debt levels), and company size influence profitability and ultimately firm value. The research focuses on companies listed in the Jakarta Islamic Index (JII). Previous research on these relationships has yielded mixed and inconsistent results. They point out that few studies have examined these variables together in a single model. This study aims to address this gap by creating a new model that explores the combined effects of green accounting, leverage, and size on profitability, and ultimately, firm value within the JII context. Theoretical Framework: This research is grounded in two key theories: stakeholder theory and signaling theory. While past empirical studies haven't yielded definitive results, this research offers a fresh perspective. The novel model developed in this study builds upon existing knowledge by examining how several previously linked variables interact and influence firm performance. Design/Methodology/Approach: This research employed a descriptive approach, analyzing financial data from company annual reports. To understand the relationships between the variables, a statistical technique called Structural Equation Modeling (SEM) was used. The study focused on companies listed on the Jakarta Islamic Index (JII) of the Indonesian Stock Exchange between 2019 and 2022. A 120-sample size from 30 companies was chosen strategically using a purposive sampling method from the JII. Result and Discussion: This study found that leverage (debt) and company size have a positive and statistically significant impact on profitability. Interestingly, green accounting practices did not have a clear influence on firm value. There was a negative effect, but it wasn't statistically significant. Firm size itself also did not directly affect firm value in a statistically significant way. However, profitability itself has a strong and positive impact on firm value. Additionally, profitability can act as an indirect factor, mediating the relationship between leverage and firm value. Based on these results, the study recommends that companies listed on the Jakarta Islamic Index (JII) consider strategic use of debt financing. This can be a way to improve profitability and ultimately attract investors, leading to a higher firm value. Originality/Value: This research introduces a novel model that investigates the interconnected effects of several variables with proven relationships.

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Section: Firm Size Effect On Profitabilitysupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Effect of Green Accounting, Leverage, Firm Size on Firm Value With Profitability as Intervening Variable

Hutabarat

2024

J. Professional Business Review

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“…The sampIe was chosen using a purposive sampling strategy, which means that the population to be utilized as the study sample fits specified sampling criteria. Purposive sampling, according to Sugiyono (2018), is a sample approach with specific concerns. The following are the requirements for firms that will be studied and utilized as study samples:…”

Section: Methodsmentioning

confidence: 99%

The Relevancy Financial Performance on Capital Structure and The Impact on the Firm Value

Anita

2023

International Journal of The Newest Finance and Accounting

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We investigate the relevancy impact of financial performance, particularly related to profitability and liquidity on capital structure and its impact on the firm value on the Indonesia Stock Exchange for the 2017-2021 period. Our sample consist of 65 companies in property industry. We use purposive sampling and obtained 45 property companies. Data analysis in the study used panel data regression by utilizing the Eviews statistical program version 10 and resulted that profitability had no significant effect on the capital structure. Then, liquidity was found to has a negative effect on the capital structure. Finally, the capital structure has a positive effect on firm value.

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“…High liquidity can affect the capital structure (Pasaribu et al, 2021;Suhardjo et al, 2022) and backs up the pecking order theory that firms with high liquidity levels favor internal financing (Reschiwati et al, 2020a). Companies can choose to use external resources as an alternative if internal resources are deemed insufficient, specifically by issuing debt and then equity.…”

Section: Introductionmentioning

confidence: 98%

Liquidity Relations, Current Ratio, Profitability, Gender Diversity, Company Size, and Company Value: Studies in Indonesia

Ummah,

Yuliana

2023

J. Keuang. dan Perbank.

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This study aims to test the influence of dependent variables (capital structure, current ratio, and profitability) on independent variables (company value) and test profitability moderation, gender diversity, and company size. Companies that use research data and are listed on the Indonesia Stock Exchange for the years 2017 through 2021 which are included in the research qualifications. Sourced from IDX website and company website. The results of the study found that the current ratio and profitability affect the value of the company. The size of the company negatively affects and the capital structure does not affect the value of the company. Profitability can strengthen the effect of the current ratio on company value and profitability cannot moderate the effect of capital structure on company value. Gender diversity can weaken the influence of capital structure and the current ratio to company value in a unidirectional manner. The influence of profitability on corporate values cannot be mitigated by gender diversity. The capital structure of the company can moderate its value depending on its size, which also has an impact on the company's value. The impact of the current ratio and profitability on the enterprise value cannot be mitigated by the company's size.

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Effect of profitability, liquidity, and company size on capital structure: Evidence from Indonesia manufacturing companies

Cited by 5 publications

References 7 publications

Effect of Green Accounting, Leverage, Firm Size on Firm Value With Profitability as Intervening Variable

Effect of Green Accounting, Leverage, Firm Size on Firm Value With Profitability as Intervening Variable

The Relevancy Financial Performance on Capital Structure and The Impact on the Firm Value

Liquidity Relations, Current Ratio, Profitability, Gender Diversity, Company Size, and Company Value: Studies in Indonesia

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