Capital Structure and Company Value

Oct 13, 2025 by leolavanderia.com.br 12 views

Introduction

The Indonesian Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed across various sectors. The basic and chemical industry sector is one of the most prominent sectors in the IDX, with a significant number of companies listed. However, the value of these companies can be influenced by various factors, including capital structure, company size, company growth, and company performance. This study aims to analyze the effect of these factors on corporate value in the basic and chemical industry sector listed on the IDX.

Capital Structure and Company Value

The capital structure is a crucial aspect of a company's financial management, as it determines the proportion of debt and equity used to finance its operations. A well-structured capital structure can have a significant impact on a company's value, as it can increase financial profitability and flexibility. This study found that the capital structure has a significant positive influence on the company's value. When companies are able to manage debt well, investors tend to give a higher assessment of the company's value. This is because a well-managed debt can increase financial profitability and flexibility, thereby increasing investor perceptions of company value.

The use of debt can also provide tax benefits, as interest payments on debt are tax-deductible. This can increase the company's net income and, in turn, its value. However, it is essential for companies to manage their debt levels carefully, as excessive debt can lead to financial distress and decreased company value. Therefore, companies need to strike a balance between using debt and equity to finance their operations.

Company Size and Company Value

The size of a company is another critical factor that affects its value. Larger companies usually have better access to resources, which allows them to invest more in innovation and development. In addition, large companies are often considered more stable and less risky, which are attractive to investors. This study found that company size has a positive impact on company value. When companies are larger, they tend to have more resources available to invest in innovation and development, which can increase their value.

Larger companies also tend to have more stable and less risky operations, which can increase investor confidence and, in turn, company value. However, it is essential to note that company size is not the only factor that affects company value. Other factors, such as capital structure, company growth, and company performance, also play a significant role in determining company value.

Company Growth

Company growth is another critical factor that affects company value. This study found that company growth has a positive impact on company value. Companies that show stable and consistent growth often attract investors, because this reflects the potential of future profits. However, it is essential for companies to maintain sustainable growth without ignoring financial performance.

Sustainable growth can be achieved through various means, including investing in innovation and development, expanding into new markets, and improving operational efficiency. However, companies need to ensure that their growth is sustainable and does not compromise their financial performance. This can be achieved by maintaining a healthy balance sheet, managing debt levels carefully, and investing in innovation and development.

Company Performance

Company performance is another critical factor that affects company value. This study found that company performance has a positive impact on company value. Good performance not only increases investor confidence but also creates a positive image in the public. This can increase stock prices and, in turn, company value. Therefore, companies need to focus on strategies that improve performance and profitability.

Good performance can be achieved through various means, including improving operational efficiency, investing in innovation and development, and expanding into new markets. However, companies need to ensure that their performance is sustainable and does not compromise their financial health. This can be achieved by maintaining a healthy balance sheet, managing debt levels carefully, and investing in innovation and development.

Conclusion

From the results of this study, it can be concluded that the capital structure and company performance have a significant and positive influence on the value of the company in the basic and chemical industry sector on the IDX. On the other hand, company size and company growth also have a positive impact, although it may not be as strong as capital structure and performance. Therefore, for investors and company management, a good understanding of these factors is very important to increase company value and attract investors.

By paying attention to all these factors, companies can formulate more effective strategies in increasing their attractiveness in the market, and in turn, increasing the company's overall value. This can be achieved by maintaining a healthy balance sheet, managing debt levels carefully, investing in innovation and development, and improving operational efficiency. Therefore, companies need to focus on strategies that improve performance and profitability, while also maintaining sustainable growth and a healthy balance sheet.

Recommendations

Based on the findings of this study, the following recommendations can be made:

Companies need to maintain a healthy balance sheet: Companies need to ensure that their balance sheet is healthy and that they have sufficient liquidity to meet their financial obligations.
Companies need to manage debt levels carefully: Companies need to manage their debt levels carefully to avoid financial distress and decreased company value.
Companies need to invest in innovation and development: Companies need to invest in innovation and development to improve their performance and profitability.
Companies need to improve operational efficiency: Companies need to improve their operational efficiency to reduce costs and increase profitability.
Companies need to focus on sustainable growth: Companies need to focus on sustainable growth without ignoring financial performance.

By following these recommendations, companies can increase their attractiveness in the market, and in turn, increase their overall value.

Q: What is the significance of capital structure in determining company value?

A: Capital structure is a crucial aspect of a company's financial management, as it determines the proportion of debt and equity used to finance its operations. A well-structured capital structure can have a significant impact on a company's value, as it can increase financial profitability and flexibility.

Q: How does company size affect company value?

A: Larger companies usually have better access to resources, which allows them to invest more in innovation and development. In addition, large companies are often considered more stable and less risky, which are attractive to investors. This can increase investor confidence and, in turn, company value.

Q: What is the role of company growth in determining company value?

A: Company growth is another critical factor that affects company value. Companies that show stable and consistent growth often attract investors, because this reflects the potential of future profits. However, it is essential for companies to maintain sustainable growth without ignoring financial performance.

Q: How does company performance affect company value?

A: Company performance is another critical factor that affects company value. Good performance not only increases investor confidence but also creates a positive image in the public. This can increase stock prices and, in turn, company value. Therefore, companies need to focus on strategies that improve performance and profitability.

Q: What are the key takeaways from this study?

A: The key takeaways from this study are:

Capital structure and company performance have a significant and positive influence on company value.
Company size and company growth also have a positive impact, although it may not be as strong as capital structure and performance.
Companies need to maintain a healthy balance sheet, manage debt levels carefully, invest in innovation and development, and improve operational efficiency.

Q: What are the implications of this study for investors and company management?

A: The implications of this study for investors and company management are:

Investors need to consider capital structure, company size, company growth, and company performance when evaluating company value.
Company management needs to focus on strategies that improve performance and profitability, while also maintaining sustainable growth and a healthy balance sheet.

Q: What are the limitations of this study?

A: The limitations of this study are:

The study only focuses on the basic and chemical industry sector in the Indonesian Stock Exchange (IDX).
The study only uses data from 2010 to 2013.
The study does not consider other factors that may affect company value, such as industry trends and market conditions.

Q: What are the future research directions based on this study?

A: The future research directions based on this study are:

To conduct a similar study on other sectors in the Indonesian Stock Exchange (IDX).
To use more recent data and consider other factors that may affect company value.
To conduct a study on the impact of capital structure, company size, company growth, and company performance on company value in other countries.

By understanding the effect of capital structure, company size, company growth, and company performance on corporate value, investors and company management can make more informed decisions and increase company value.