Increasing Company Value: The Role of Profitability and Capital Structureand Tax Avoidance as Mediation
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Aug 29, 2023
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Abstract
Firm value is an important factor in the view of investors as well as a form of success for managers in managing the company. In addition to success for managers, company value can also have an impact on increasing stock prices. The purpose of this study is to see how the influence of capital structure, profitability and tax avoidance on firm value. The samples selected in this study were 59 technology sector companies listed on the Stock Exchange and the Singapore Stock Exchange for the period 2017 to 2022. The sampling technique used in this study was to use side non-probability using a purposive sampling method. Data analysis in this study uses path analysis with the help of Smart-PLS software to test the proposed model. The results of this study indicate that the three variables consisting of capital structure, profitability and tax avoidance have a significant positive effect on firm value. Likewise, the role of tax avoidance was found to be a variable that mediates between capital structure and profitability on firm value.
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References
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Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3). https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
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Qayyum, N. (2019). Impact of capital structure on profitability: A comparative study of islamic and conventional banks of Pakistan. Journal of Asian Finance, Economics and Business, 6(4), 65–74. https://doi.org/10.13106/jafeb.2019.vol6.no4.65
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Vaicondam, Y. (2017). Capital structure and profitability across Malaysian listed firms. Advanced Science Letters, 23(9), 9275–9278. https://doi.org/10.1166/asl.2017.10069
Wijaya, H., Tania, D., & Cahyadi, H. (2021). Faktor-Faktor Yang Mempengaruhi Nilai Perusahaan. Jurnal Bina Akuntansi, 8(2), 109–121. https://doi.org/10.52859/jba.v8i2.148
Yuniningsih, Y., Pertiwi, T. K., & Purwanto, E. (2019). Fundamental factor of financial management in determining company values. Management Science Letters, 9(2), 205–216. https://doi.org/10.5267/j.msl.2018.12.002
Zulfahmy, A., Susyanti, J., & Rahman, F. (2021). Pengaruh Tata Kelola Perusahaan Dan Perencanaan Pajak Terhadap Manajemen Laba Pada Perusahaan Manufaktur Di Indonesia. Jurnal Ilmiah Riset …, 10(7).
Chang, C. C. (2019). Relationship between capital structure and profitability: Evidence from Four Asian Tigers. Journal of Management Information and Decision Sciences, 22(2), 54–65.
Dang, H. N. (2019). Study the Impact of Growth, Firm Size, Capital Structure, and Profitability on Enterprise Value: Evidence of Enterprises in Vietnam. Journal of Corporate Accounting and Finance, 30(1), 144–160. https://doi.org/10.1002/jcaf.22371
Ezeani, E., Salem, R., Kwabi, F., Boutaine, K., Bilal, & Komal, B. (2022). Board monitoring and capital structure dynamics: evidence from bank-based economies. Review of Quantitative Finance and Accounting, 58(2). https://doi.org/10.1007/s11156-021-01000-4
Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement error: Algebra and statistics. Journal of Marketing Research, 18(3), 382–388.
Habibniya, H. (2022). Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States. Risks, 10(8). https://doi.org/10.3390/risks10080157
Habrosh, A. (2017). Impact of cash flow, profitability, liquidity, and capital structure ratio on predict financial performance (Study in banking companies listed in Indonesian stock exchange 2007–2011). Advanced Science Letters, 23(8), 7177–7179. https://doi.org/10.1166/asl.2017.9322
Henseler, J., Dijkstra, T. K., Sarstedt, M., Ringle, C. M., Diamantopoulos, A., Straub, D. W., Ketchen, D. J., Hair, J. F., Hult, G. T. M., & Calantone, R. J. (2014). Common Beliefs and Reality About PLS: Comments on Rönkkö and Evermann (2013). Organizational Research Methods, 17(2), 182–209. https://doi.org/10.1177/1094428114526928
Hirdinis, M. (2019). Capital structure and firm size on firm value moderated by profitability. International Journal of Economics and Business Administration, 7(1), 174–191. https://doi.org/10.35808/ijeba/204
Jouida, S. (2018). Diversification, capital structure and profitability: A panel VAR approach. Research in International Business and Finance, 45, 243–256. https://doi.org/10.1016/j.ribaf.2017.07.155
Mansikkamäki, S. (2023). Firm growth and profitability: The role of age and size in shifts between growth–profitability configurations. Journal of Business Venturing Insights, 19. https://doi.org/10.1016/j.jbvi.2023.e00372
Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance, and The Theory of Investment . The American Economic Review, 48(3), 261–297.
Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3). https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
Ngatemin. (2018). Effects of institutional ownership and profitability to firm value with the capital structure as intervening variable (empirical study at company tourism industry sector listed in Indonesia). In International Journal of Civil Engineering and Technology (Vol. 9, Issue 5, pp. 1305–1320).
O’Connell, M. (2023). Bank-specific, industry-specific and macroeconomic determinants of bank profitability: evidence from the UK. Studies in Economics and Finance, 40(1). https://doi.org/10.1108/SEF-10-2021-0413
Otekunrin, A. (2018). Capital structure and profitability of selected agriculture and agro-allied firms on Nigerian stock exchange: Post international financial reporting standard analysis. International Journal of Civil Engineering and Technology, 9(13), 1615–1625.
Otekunrin, A. O. (2017). Adoption of International Financial Reporting Standard, capital structure and profitability of selected quoted firms in Nigeria. In Proceedings of the 29th International Business Information Management Association Conference - Education Excellence and Innovation Management through Vision 2020: From Regional Development Sustainability to Global Economic Growth (pp. 3788–3797).
Qayyum, N. (2019). Impact of capital structure on profitability: A comparative study of islamic and conventional banks of Pakistan. Journal of Asian Finance, Economics and Business, 6(4), 65–74. https://doi.org/10.13106/jafeb.2019.vol6.no4.65
Rahayu, S. M. (2020). The reciprocal relationship between profitability and capital structure and its impacts on the corporate values of manufacturing companies in Indonesia. International Journal of Productivity and Performance Management, 69(2), 236–251. https://doi.org/10.1108/IJPPM-05-2018-0196
Vaicondam, Y. (2017). Capital structure and profitability across Malaysian listed firms. Advanced Science Letters, 23(9), 9275–9278. https://doi.org/10.1166/asl.2017.10069
Wijaya, H., Tania, D., & Cahyadi, H. (2021). Faktor-Faktor Yang Mempengaruhi Nilai Perusahaan. Jurnal Bina Akuntansi, 8(2), 109–121. https://doi.org/10.52859/jba.v8i2.148
Yuniningsih, Y., Pertiwi, T. K., & Purwanto, E. (2019). Fundamental factor of financial management in determining company values. Management Science Letters, 9(2), 205–216. https://doi.org/10.5267/j.msl.2018.12.002
Zulfahmy, A., Susyanti, J., & Rahman, F. (2021). Pengaruh Tata Kelola Perusahaan Dan Perencanaan Pajak Terhadap Manajemen Laba Pada Perusahaan Manufaktur Di Indonesia. Jurnal Ilmiah Riset …, 10(7).