Free Cash Flow, Investment, Capital Structure and Firm Value

Rina Br. Bukit, Sri Mulyani, Fahmi N. Nasution, Richard Chinomona

2019

Abstract

Shareholders are very interested in the company's performance and prospects, which are generally referred to as company value. Information of corporate value declining is not mitigated by companies that have many stakeholders. Literature shows that the following factors have an impact on company values such as free cash flow, investment and capital structure. Decreasing the value of the company can endanger all parties including investors. A supervisory system for company management decisions is needed to reduce losses and adverse effects of a decrease in company value. However, in-depth research on corporate value models that are influenced by free cash flow and investment through capital structures is still rarely done. The purpose of the study was to examine the effect of intervening variable of capital structure in the relationship between free cash flow and investment with firm value. The research population is non-banking companies listed on the Indonesia Stock Exchange in 2014-2016. The dependent variable of this study is company value and the independent variable is free cash flow and investment. Intervening variable is capital structure. Control variable is company size, audit quality and company growth. The results of multiple regression analysis show that free cash flow and investment have a positive effect on firm value. The results of this research also show that free cash flow and investment have a negative effect on capital structure. However, this study did not find the effect of capital structure on firm value. Hence, capital structure does not play a role as an intervening variable between free cash flow and investment with firm value

Paper Citation

in Harvard Style

Bukit R., Mulyani S., Nasution F. and Chinomona R. (2019). Free Cash Flow, Investment, Capital Structure and Firm Value. In Proceedings of the 2nd Economics and Business International Conference - Volume 1: EBIC, ISBN 978-989-758-498-5, pages 122-126. DOI: 10.5220/0009200001220126

in Bibtex Style

@conference{ebic19,
author={Rina Br. Bukit and Sri Mulyani and Fahmi N. Nasution and Richard Chinomona},
title={Free Cash Flow, Investment, Capital Structure and Firm Value},
booktitle={Proceedings of the 2nd Economics and Business International Conference - Volume 1: EBIC,},
year={2019},
pages={122-126},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0009200001220126},
isbn={978-989-758-498-5},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 2nd Economics and Business International Conference - Volume 1: EBIC,
TI - Free Cash Flow, Investment, Capital Structure and Firm Value
SN - 978-989-758-498-5
AU - Bukit R.
AU - Mulyani S.
AU - Nasution F.
AU - Chinomona R.
PY - 2019
SP - 122
EP - 126
DO - 10.5220/0009200001220126