Capital Structure, Profitability, And Firm Value. Whats New?

Abstract

The use of debt by the company should be used to enhance the company's operations, expansion, and increasesales, so that the company's profitability can be increased. Firm’s Value is investor perception of the company,which is often associated with stock prices. High stock prices could enhance shareholder value. The Firm's valuecan be estimated with Tobin's Q, which is the replacement cost required to obtain the same assets with the assetsof the company. The purpose of this study was conducted to examine the relationship between capital structure(DER), the company's performance (ROE) and Firm value (Tobin's Q) of companies listed on the IndonesianStock Exchange. The research data consisted of 130 manufacturing companies from 2011 to 2014. The analysistool used is regression analysis. Results showed that the financial performance be a better mediator to firm valuethan the capital structure. There is a negative influence between capital structure and profitability, the positiveeffects of capital structure and profitability of the Firm's value.Keywords: Capital Structure, Profitability, Firm Value