Corporate Finance and Firm Value in the Indonesian Manufacturing Companies

Eka Handriani, Robiyanto Robiyanto

Abstract


This study examines the impact of dividend policy, investment decision, and funding policy on firm value in the Indonesian manufacturing companies. This study was conducted by using 178 manufacturing companies listed in the Indonesia Stock Exchange (IDX) during the period 2009 - 2016. Samples were taken by using a purposive sampling method. This study aims to examine the firm value’s main determinants of the manufacturing companies in Indonesia based on basic theory of capital structure through building theoretical model. Partial Least Square through path analysis was used to analyze the data. The findings show that dividend policy, investment decision, and funding policy have a positive impact on the Indonesian manufacturing companies’ firm value. This study supports the theory of pecking order and agency theory. 

Keywords: Dividend policy, Investment decision, Funding Policy, Firm Value, Pecking Order Theory, Agency Theory

 https://doi.org/10.21632/irjbs.11.2.113-127


Full Text:

PDF

References


Adam, K., Jappelli, T., Menichini, A., Padula, M., & Pagano, M. (2002). Analyse, Compare, and Apply Alternative Indicators and Monitoring Methodologies to Measure the Evolution of Capital Market. Centre for Studies in Economics and Finance (CSEF) Report.

Al-Malkawi, H. A. N., Rafferty, M., & Pillai, R. (2010). Dividend policy: A review of theories and empirical evidence. International Bulletin of Business Administration, 9(1), 171-200.

Al-Tamimi, H. A. H. K. (2009). Financial Literacy and Investment Decisions of UAE Investors. The Journal of Risk Finance, 10(5), 500-516.

Al Shabibi, B. K., & Ramesh, G. (2011). An empirical study on the determinants of dividend policy in the UK. International Research Journal of Finance and Economics, 80, 105-120.

Baptista-Rui, K. L. J. (2010). Diversification by Young. Small Firms, 1-37.

Boubakri, N., Cosset, J.-C., & Some, H. Y. (2015). Introduction to Institutional Investors in Global Capital Markets Institutional Investors in Global Capital Markets: Emerald Group Publishing Limited.

Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management: Cengage Learning.

Buchari, A., Achsani, N. A., Tambunan, M., & Maulana, T. N. A. (2016). The Capital Structure of Venture Capital Firms in Indonesia. Jurnal Keuangan dan Perbankan 20(3).

Cornett, M. M., Marcus, A. J., Saunders, A., & Tehranian, H. (2007). The impact of institutional ownership on corporate operating performance. Journal of Banking & Finance, 31(6), 1771-1794. doi: 10.1016/j.jbankfin.2006.08.006

Dessyana, A., & Riyanti, B. P. D. (2017). The Influence of Innovation and Entrepreneurial Self-Efficacy to Digital Startup Success. International Research Journal of Business Studies, 10(1). doi: https://doi.org/10.21632/irjbs.10.1.57-68

Donaldson, G. (1961). Corporate debt capacity: A study of corporate debt policy and the determination of corporate debt capacity. Boston, MA: Division of Research, Graduate School of Business Administration, Harvard University.

Ernayani, R., Oktiviana, S., & Robiyanto, R. (2017). The Effect of Return on Investment, Cash Ratio, and Debt to Total Assets Towards Dividend Payout Ratio (A Study Towards Manufacturing Companies Listed in Indonesia Stock Exchange). Advanced Science Letters, 23(8), 7169-7199. doi: https://doi.org/10.1166/asl.2017.9328

Ernayani, R., & Robiyanto, R. (2016). The effect of the cash flows, gross profit and company size on Indonesian stock returns (a study on the chemical and basic industry companies during the periods of 2009-2014) International Journal of Applied Business and Economic Research, 14(3).

Ernayani, R., Robiyanto, R., & Sudjinan, S. (2017). Factors influencing profit distribution management of sharia commercial banks in Indonesia. Journal of Economics, Business & Accountancy Ventura, 20(2). doi: 10.14414/jebav.v20i2.1055

Fauzi, F., & Locke, S. (2012). Board Structure , Ownership Structure and Firm Performance: a Study of New Zealand. Asian Academy of Management Journal of Accounting and Finance, 8(2), 43-67.

Gusni, G. (2017). The Determinants of Dividend Policy: A Study of Financial Industry in Indonesia. Jurnal Keuangan dan Perbankan 21(4).

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2009). Multivariate Data Analysis (7 ed.): Pearson.

Handriani, E. (2016). Role of Investment Opportunity Based on Industrial Growth (Kibig) To Increase Company Value (Empirical Study on Manufacturing Company Go Public In Indonesian Capital Market). Dissertation, Universitas Diponegoro, Semarang, Indonesia.

Handriani, E. (2017). Memanfaatkan Peluang Investasi Berbasis Pertumbuhan Industri Untuk Meningkatkan Laba dan Nilai Perusahaan

Handriani, E., & Irianti, T. E. (2015). Investment Opportunity Set (IOS) Berbasis Pertumbuhan Perusahaan dan Kaitannya Dengan Upaya Peningkatan Nilai Perusahaan. Jurnal Ekonomi dan Bisnis, 18(1), 83-99.

Heaney, R., Naughton, T., Truong, T., Davidson, S., Fry, T., & McKenzie, M. (2007). The link between performance and changes in the size and stability of a firm’s officers and directors. Journal of Multinational Financial Management, 17(1), 16-29.

Hermiyetti, & Malik, E. N. (2013). The Influence of Good Corporate Governance Mechanism on Earnings Management: Empirical Study in Indonesian Stock Exchange Listed Company for Periods of 2006-2010. Indonesian Capital Market Review, 5(1).

Hermuningsih. (2013). Pengaruh Profitabilitas, Growth Opportunity, Struktur Modal Terhadap Nilai Perusahaan Pada Perusahaan Publik di Indonesia. Buletin Ekonomi Moneter dan Perbankan.

Huang, W., Jiang, F., Liu, Z., & Zhang, M. (2011). Agency cost, top executives' overconfidence, and investment-cash flow sensitivity—Evidence from listed companies in China. Pacific-Basin Finance Journal, 19(3), 261-277.

Humphrey-Jenner, M. L., & Powell, R. G. (2011). Firm size, takeover profitability, and the effectiveness of the market for corporate control: Does the absence of anti-takeover provisions make a difference? Journal of Corporate Finance, 17(3), 418-437. doi: https://doi.org/10.1016/j.jcorpfin.2014.02.009

Irandoost, R., Hassanzadeh, R. B., & Salteh, H. M. (2013). The Effect of Dividend Policy on Stock Price Volatility and Investment Decisions. European Online Journal of Natural and Social Sciences, 2(3), 51-59.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

John, S. F., & Muthusamy, K. (2010). Leverage, growth and profitability as determinants of dividend payout ratio-evidence from Indian paper industry. Asian Journal of Business Management Studies, 1(1), 26-30.

Kang, T., Lobo, G. J., & Wolfe, M. C. (2015). Accounting Conservatism and Firm Growth Financed by External Debt The Role of Debt Maturity. Journal of Accounting, Auditing & Finance.

Kato, H. K., Loewenstein, U., & Tsay, W. (2012). Dividend Policy, Cash Flow, and Investment in Japan. Pacific-Basin Finance Journal 10(4).

Madanoglu, M., Lee, K., & Castrogiovanni, G. J. (2011). Franchising and firm financial performance among U.S. restaurants. Journal of Retailing, 87, 406-408.

Mai, M. U. (2010). Impact Of Dividend Policy On Company Value In Manajerial Oportunistic Behavioral Conduct And Corporate Governance Structure Empirical Study on Manufacturing Companies Go Public In Indonesian Capital Market. Dissertation, Universitas Diponegoro, Semarang, Indonesia.

Mai, M. U. (2017). Mediation of CSR and Profitability on the Influences of GCG Mechanism to the Firm Value. Jurnal Keuangan dan Perbankan 21(2), 253-264.

Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and The Theory of Investment. American Economic Review, 48(13), 261-297.

Murhadi, W. R. (2011). Determinan Struktur Modal: Studi di Asia Tenggara. Jurnal Manajemen dan Kewirausahaan, 13(2), 91-98.

Myers, S. C. (1984). Finance theory and financial strategy. Interfaces, 14(1), 126-137.

Nhung, N. T. P., Lien, N. P., & Hang, D. T. T. (2017). Analyze the Determinants of Capital Structure for Vietnamese Real Estate Listed Companies. International Journal of Economics and Financial Issues, 7(4).

Nur, T. (2014). Searching for Determinants of Pay or Not to Pay Cash Dividend in Indonesia. Indonesian Capital Market Review, 6(1).

Nuswandari, C. (2013). Determinan Struktur Modal Dalam Perspektif Pecking Order Theory dan Agency Theory. Dinamika Akuntansi Keuangan dan Perbankan, 2(1).

Ovtcharova, G. (2003). Institutional Ownership and Long Term Stock Returns. Working Paper.

Pagalung, G. (2002). Effect of Combination of the advantages and limitations of the Company to the Investment Opportunity Set (IOS). Paper presented at the National Symposium Accounting 5, Semarang.

Panno, A. (2003). An Empirical Investigation on The Determinants of Capital Structure: the UK and Italian Experience. Applied Financial Economics, 13, 97-112.

Prasetyantoko, A. (2006). Financing Constraint and Firm Investment Following a Financial Crisis. Paper presented at the 23rd International Symposium on Banking and Monetary Economics.

Purnamawati, I. G. A., Yuniarta, G. A., & Astria, P. R. (2017). Good Corporate Governance dan Pengaruhnya Terhadap Nilai Perusahaan Melalui Corporate Social Responsibility Disclosure. Jurnal Keuangan dan Perbankan 21(2), 276-286.

Qureshi, S. U., & Sharif, S. (2012). Impact of TQM practices on firm's performance of Pakistan's manufacturing organizations. International Journal of Academic Research in Business and Social Sciences, 2(10).

Raz, K. R., & Amir, M. (2014). A Review of Interaction of Financial Leverage and Investment Opportunities on Dividend Policy. Researcher 4.

Robiyanto, R. (2015). Month of the year effect pada beberapa pasar modal di Asia Tenggara dan pasar komoditas. Jurnal Ekonomi dan Bisnis, 18(2), 53-64. doi: 10.24914/jeb.v18i2.260

Robiyanto, R., & Puryandani, S. (2015). The Javanese lunar calendar’s effect on Indonesian stock returns. Gadjah Mada International Journal of Business, 17(2), 125-137. doi: 10.22146/gamaijb.6906

Robiyanto, R., Wahyudi, S., & Pangestuti, I. R. D. (2017). The volatility–variability hypotheses testing and hedging effectiveness of precious metals for the Indonesian and Malaysian capital markets. Gadjah Mada International Journal of Business, 19(2), 167-192. doi: 10.22146/gamaijb.26260

Sahabuddin, Z. A. (2017). Asset Structure Impact on Capital Structure of Capital Market-Listed Firms in Indonesia and Malaysia. Jurnal Keuangan dan Perbankan 21(3).

Siahaan, F. O. (2013). The Effect of Good Corporate Governance Mechanism, Leverage, and Firm Size on Firm Value. GSTF Journal on Business Review, 2(4).

Skinner, D. J., & Soltes, E. (2009). What Do Dividends Tell Us About Earnings Quality. Review of Accounting Studies

Subramaniam, R. K., & Shaiban, M. S. (2011). Investment opportunity set and dividend policy in Malaysia: Some evidence on the role of ethnicity and family control. Paper presented at the International Conference on Economics, Business and Management.

Suprianto, E., & Setiawan, D. (2017). Manajemen Laba di Indonesia: Studi Sebuah Bibliograpi. Jurnal Keuangan dan Perbankan 21(2), 287-301.

Suteja, J., & Mayasari, A. N. (2017). Is Investment Policy Value-Enhancing through CSR Disclosure? Jurnal Keuangan dan Perbankan 21(4).

Symeou, P. C. (2011). The firm size - performance relationship: an empirical examination of the role of the firm’s growth potential. Working Paper.

Taungke, N., & Supramono, S. (2015). Ex-dividend Date dan Perubahan Harga Saham. Jurnal Keuangan dan Perbankan, 19(3).

Tyastari, T. T. D., Rosidi, R., & Saraswati, E. (2017). Dividend Policy and Corporate Value (A Meta-Analysis). Jurnal Keuangan dan Perbankan 21(3).

Ullah, H., Fida, A., & Khan, S. (2012). The Impact of Ownership Structure on Dividend Policy Evidence from Emerging Markets KSE-100 Index Pakistan. International Journal of Business and Social Science, 3(9), 298-307.

Wahyudi, S. (Cartographer). (2005). Shifting Development Strategy Jakarta Stock Exchange (JSX): Growth Liberal Towards Fair Competition

Wijaya, R. (2017). Kinerja Keuangan dan Ukuran Perusahaan terhadap Harga Saham dengan Kebijakan Dividen sebagai Variabel Intervening. Jurnal Keuangan dan Perbankan, 21(3).

Zheng, Y. (2017). Three Essays on Capital Structure and Product Market Interactions. Doctoral Dissertation. Retrieved from http://scholarcommons.sc.edu/etd/4117


Refbacks

  • There are currently no refbacks.




International Research Journal of Business Studies indexed in: