Does capital structure moderate the impact of the investment opportunity set and institutional ownership on firm value?


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The existence of a research gap compared to previous studies related to the effect of the relationship between institutional ownership and investment opportunity set on firm value in Indonesia is interesting to review. This study aims to reveal the relationship of these influences by adding capital structure as a moderating variable that serves to strengthen it against firm value. The research variables are the ratio of market value to book value of assets, institutional ownership, debt-to-equity ratio and free cash flow. The research timeframe is 2019–2021, using data taken from companies in the manufacturing sector in the Indonesian Capital Market (IDX). Data sampling was carried out using the purposive sampling method. Data analysis to determine the relationship of these effects and hypothesis testing were performed using multiple regression. The empirical research findings indicate that the investment opportunity set has a positive effect on increasing firm value, while capital structure has a negative effect on decreasing it. Institutional ownership and free cash flow do not determine firm value, so free cash flow does not serve as a control variable. The main finding of this study is revealing that capital structure plays a role in strengthening the effect of the relationship between investment opportunity sets on firm value.

This research is an independent study that is not funded by donor agencies.

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    • Table 1. Final research sample
    • Table 2. Descriptive statistics
    • Table 3. Regression results
    • Conceptualization
      Bambang Sudiyatno, Sri Sudarsi, Ika Rosyada Fitriati
    • Formal Analysis
      Bambang Sudiyatno
    • Investigation
      Bambang Sudiyatno, Witjaksono Eko Hartoto
    • Methodology
      Bambang Sudiyatno
    • Validation
      Bambang Sudiyatno, Sri Sudarsi, Ika Rosyada Fitriati
    • Writing – original draft
      Bambang Sudiyatno
    • Data curation
      Sri Sudarsi, Witjaksono Eko Hartoto
    • Writing – review & editing
      Sri Sudarsi, Witjaksono Eko Hartoto, Ika Rosyada Fitriati
    • Resources
      Witjaksono Eko Hartoto
    • Visualization
      Witjaksono Eko Hartoto
    • Software
      Ika Rosyada Fitriati