Cost of capital and firm value: Evidence from Indonesia

  • Received August 24, 2022;
    Accepted September 26, 2022;
    Published October 6, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.19(4).2022.02
  • Article Info
    Volume 19 2022, Issue #4, pp. 14-22
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Cost and capital structure are needed to evaluate the feasibility of the investments made by a company. This study aims to estimate and analyze the effect of the component of cost of capital (COC) and capital structure (CS) on firm value. Pulp & Paper companies listed on the Indonesia Stock Exchange (IDX) became the research sample for the 2013–2020 period. The research method applied is a moderation regression analysis approach. The empirical findings of the study prove that firm value is not influenced by the cost of debt (COD), while the cost of equity (COE) has a negative effect, and COC is positive. COC is a combination of the use of debt and equity, modeling by adding a CS variable as a moderating variable; this leads to the conclusion that COD and COE have a negative effect on firm value, whereas COC and CS have a positive effect. The finding of the role of CS as a moderating variable reveals that CS is a quasi-moderator variable and plays a role in increasing.

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    • Table 1. Descriptive statistics
    • Table 2. Effect of COD, COE, COC on PBV of Pulp & Paper companies, moderated CS and controlled firm size (Fixed effect model)
    • Conceptualization
      Augustina Kurniasih, Muhamad Rustam
    • Formal Analysis
      Augustina Kurniasih, Endri Endri
    • Methodology
      Augustina Kurniasih, Muhamad Rustam, Endri Endri
    • Resources
      Augustina Kurniasih, Heliantono
    • Visualization
      Augustina Kurniasih, Muhamad Rustam
    • Writing – original draft
      Augustina Kurniasih, Muhamad Rustam
    • Data curation
      Muhamad Rustam, Heliantono
    • Funding acquisition
      Muhamad Rustam, Heliantono
    • Project administration
      Muhamad Rustam, Heliantono
    • Software
      Muhamad Rustam
    • Validation
      Muhamad Rustam, Heliantono, Endri Endri
    • Supervision
      Endri Endri
    • Writing – review & editing
      Endri Endri