Analysis of the Influence of Capital Structure and Profit Ability on Corporate Value: Empirical Study with Modigliani and Miller Theory of Investment Review

Abstract

This study aims to provide empirical evidence of the influence of capital structure and profitability on firm value. The selection of independent variables capital structure and profitability to prove the proposition Modigliani and Miller (1958) which states that the value of the company is not influenced by capital structure, but rather influenced by profitability. The results of this study are expected to provide insight and understanding of capital market behavior in Indonesia, particularly those relating to decision making by investors. The contribution of research results is to the field of accounting especially the subject of financial accounting and the subject of investment and portfolio management is the field of science that gets the most contribution from this research. The results of this study can also be used as learning material for the course concerned. The research method used is descriptive quantitative, using multiple regression analysis, using secondary data from LQ 45 companies listed on the Indonesia Stock Exchange. hypothesis testing does not support the Modigliani and Miller (1958) hypotheses, which maintain market efficiency and symmetrical assumptions of information and state that capital structure will not affect firm value

Keywords: capital structure, profitability, company value, LQ 45

DOI: 10.7176/EJBM/12-3-20

Publication date: January 31^st 2020