The Influence of Capital Structure, Growth Opportunity and Profitability at Mining Companies in Indonesia

Abstract

Objectives: The purpose of this research is to examine the influence of capital structure and growth opportunity on profitability as well as intrinsic value of mining company in Indonesia Stock Exchange.Methods/Analysis: The data for this research is analyzed through path analysis. The population of this research is mining companies listed on the Indonesian Stock Exchange in period 2013-2015. The target population that meets the research criteria is 32 mining companies. Capital structure and growth opportunity as independent variable, profitability as intervening variable, and the intrinsic value of the company as dependent variable which is the net present value of projected free cash flow to firm (FCFF).Findings:The results of this analysis show that, capital structure and profitability partially have significant influence on intrinsic value of the company, while growth opportunity does not partially influence on intrinsic value of the company significantly. Moreover, profitability cannot mediate the relationship between capital structure and intrinsic value of the company; and profitability can mediate the relationship between growth opportunity and intrinsic value of the company at alpha 5%.

Keywords: Capital Structure, Growth Opportunity, Profitability, Free Cash Flow to Firm, Intrinsic Value