The Role of Dividend Policy and Investment Opportunity Set Mediating Free Cash Flow Effect on Firm Value

Abstract

Firm value could be described as investors perception’s of a company’s degree of success that is related to its stock price. Stock prices are determined by internal and external factors of the company that are used as the basis for investors in decision making. The population in the study is a manufacturing company listed on the Indonesia Stock Exchange (IDX) with a total of 60 companies, with census methods. Data collection was carried out using non-participant observation methods. The data analysis technique used is path analysis. Based on the results of the analysis found that, free cash flow has a positive and insignificant effect on firm value, free cash flow has a positive and significant effect on dividend policy, free cash flow has a positive and significant effect on investment opportunity set, dividend policy has a positive and significant effect on firm value , investment opportunity set has a positive and significant effect on firm value, dividend policy capable of mediating the effect of free cash flow on firm value and investment opportunity set companies capable of mediating the effect of free cash flow on firm value.

Keywords: firm value, free cash flow, dividend policy, investment opportunity set