Cost of capital and firm value: Evidence from Indonesia

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 Exch...

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Bibliographic Details
Published inInvestment management & financial innovations Vol. 19; no. 4; pp. 14 - 22
Main Authors Kurniasih, Augustina, Rustam, Muhamad, Heliantono, Endri, Endri
Format Journal Article
LanguageEnglish
Published Sumy Business Perspectives Ltd 06.10.2022
LLC "CPC "Business Perspectives
Subjects
Capital budgeting
Capital structure
College professors
Conflicts of interest
Cost of capital
cost of debt
cost of equity
Costs
Debt financing
Equity financing
Investment advisors
pulp & paper companies
Stock exchanges
Indonesia
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Summary: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.
ISSN:1810-4967
1812-9358
DOI:10.21511/imfi.19(4).2022.02