Corporate Finance and Firm Value on the Indonesia Stock Exchange

Joubert Barens Maramis; Ivonne S. Saerang; Hendra Novie Tawas

doi:10.61255/jeemba.v4i4.1954

Authors

Joubert Barens Maramis Universitas Sam Ratulangi, Indonesia
Ivonne S. Saerang Universitas Sam Ratulangi, Indonesia
Hendra Novie Tawas Universitas Sam Ratulangi, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i4.1954

Keywords:

Corporate Finance, Dividend Decision, Firm Value, Investment Decision, Indonesia Stock Exchange

Abstract

Purpose – This study examines the relationship between corporate finance decisions and firm value among companies listed on the Indonesia Stock Exchange, focusing on financing, investment, and dividend-related decisions. It also evaluates the robustness of these relationships across alternative firm-value measures, economic controls, and time horizons.

Design/methodology/approach – A confirmatory quantitative design was employed using secondary financial data from 155 listed companies during 2012–2022. Firm value was measured using Tobin’s Q and the market-to-book ratio. Multiple linear regression was conducted using SPSS, with robustness tests incorporating IHSG, inflation, interest rates, exchange rates, and 2-, 5-, and 10-year periods.

Findings – The determinants of firm value vary across measurement proxies. Free cash flow significantly affects firm value when measured by Tobin’s Q, while fixed assets are the only significant determinant when using the market-to-book ratio. These findings remain consistent after controlling for macroeconomic factors and across different time horizons.

Originality/Value – This study demonstrates that the influence of corporate finance decisions on firm value is sensitive to the measurement proxy but robust across alternative model specifications, economic controls, and time periods. The findings highlight the distinct roles of dividend-related financial capacity and investment decisions in shaping firm value in the Indonesian capital market.

Abstract views: 16 ,

PDF downloads: 8

Downloads

Download data is not yet available.

References

Alam, Md. S., Safiullah, M., & Islam, Md. S. (2022). Cash-rich firms and carbon emissions. International Review of Financial Analysis, 81, 102106. https://doi.org/10.1016/j.irfa.2022.102106

Amihud, Y., & Levi, S. (2022). The Effect of Stock Liquidity on the Firm’s Investment and Production. Review of Financial Studies, 36(3), 1094–1147. https://doi.org/10.1093/rfs/hhac036

Antoniou, C., Li, F. W., Liu, X., Subrahmanyam, A., & Sun, C. (2022). Exchange-Traded Funds and Real Investment. Warwick Research Archive Portal (University of Warwick), 36(3), 1043–1093. https://doi.org/10.1093/rfs/hhac043

Apriadi, D., Artino, A., Ramdhani, M. A., Fithriani, M., & Marihi, L. O. (2025). Pengaruh Keputusan Investasi, Pendanaan, dan Kebijakan Dividen terhadap Nilai Perusahaan. Jurnal Pengabdian Masyarakat Dan Riset Pendidikan, 4(1), 2865–2873. https://doi.org/10.31004/jerkin.v4i1.2049

Berk, J., Green, R., & Naik, V. (1998). Optimal Investment, Growth Options, and Security Returns. In The Journal of Finance (Vol. 54, Issue 5, pp. 1553–1607). Wiley. https://doi.org/10.1111/0022-1082.00161

Brown, J. R., Gustafson, M., & Ivanov, I. (2021). Weathering Cash Flow Shocks. The Journal of Finance, 76(4), 1731–1772. https://doi.org/10.1111/jofi.13024

Carlson, M., Fisher, A. J., & Giammarino, R. (2004). Corporate Investment and Asset Price Dynamics: Implications for the Cross‐section of Returns. The Journal of Finance, 59(6), 2577–2603. https://doi.org/10.1111/j.1540-6261.2004.00709.x

Cheng, Y., Liu, Y., & Chien, C. (2010). Capital structure and firm value in China: A panel threshold regression analysis. AFRICAN JOURNAL OF BUSINESS MANAGEMENT, 4(12), 2500–2507. https://doi.org/10.5897/ajbm.9000127

Cooper, I., & Maio, P. F. (2018). Asset Growth, Profitability, and Investment Opportunities. Management Science, 65(9), 3988–4010. https://doi.org/10.1287/mnsc.2018.3036

Cooper, M. J., Gulen, H., & Schill, M. J. (2008). Asset Growth and the Cross‐Section of Stock Returns. The Journal of Finance, 63(4), 1609–1651. https://doi.org/10.1111/j.1540-6261.2008.01370.x

Daniel, K., Garlappi, L., & Xiao, K. (2021). Monetary Policy and Reaching for Income. The Journal of Finance, 76(3), 1145–1193. https://doi.org/10.1111/jofi.13004

Dewi, H. R., & Muhyarsyah, M. (2025). ESG disclosure, capital structure, and profitability in explaining firm value of Indonesia’s IDX ESG Leaders: Some notes from Islamic finance perspectives. Journal of Islamic Economics Lariba, 12(1), 1–30. https://doi.org/10.20885/jielariba.vol12.iss1.art1

Ďurana, P., Michalkova, L., Přívara, A., Maroušek, J., & Tumpach, M. (2021). Does the life cycle affect earnings management and bankruptcy? Oeconomia Copernicana, 12(2), 425–461. https://doi.org/10.24136/oc.2021.015

Dwianto, A., Puspitasari, D., A’yun, A. Q., Sulistyawati, A. I., & Pugara, A. (2024). Sustainability Environmental Performance Future Investment for Company Value. Journal of Ecohumanism, 3(2), 233–250. https://doi.org/10.33182/joe.v3i2.3193

Ermawati, Y. (2024). The Role of Corporate Finance in Maximizing Shareholder Wealth and Driving Sustainable Growth. Advances in Management & Financial Reporting, 2(3), 173–185. https://doi.org/10.60079/amfr.v2i3.384

Ernayani dan Robiyanto, 2016; The effect of the cash flows, gross profit and company size on Indonesian stock returns (a study on the chemical and basic industry companies during the periods of 2009-2014). International Journal of Applied Business and Economic Research, 14(3).

Ernayani et al., 2017, The Effect of Return on Investment, Cash Ratio, and Debt to Total Assets Towards Dividend Payout Ratio (A Study Towards Manufacturing Companies Listed in Indonesia Stock Exchange). Advanced Science Letters, 23(8), 7169-7199. doi: https://doi.org/10.1166/asl.2017.9328

Falato, A., Kadyrzhanova, D., Sim, J., & Steri, R. (2022). Rising Intangible Capital, Shrinking Debt Capacity, and the U.S. Corporate Savings Glut. The Journal of Finance, 77(5), 2799–2852. https://doi.org/10.1111/jofi.13174

Farmer, L. E., Schmidt, L., & Timmermann, A. (2023). Pockets of Predictability. The Journal of Finance, 78(3), 1279–1341. https://doi.org/10.1111/jofi.13229

Ganta, G. (2025). THE INFLUENCE OF FINANCIAL LEVERAGE ON FIRM VALUE: A QUANTITATIVE APPROACH. EPRA International Journal of Multidisciplinary Research (IJMR), 286–289. https://doi.org/10.36713/epra21437

George, T. J., Hwang, C.-Y., & Li, Y. (2018). The 52-week high, q-theory, and the cross section of stock returns. Journal of Financial Economics, 128(1), 148–163. https://doi.org/10.1016/j.jfineco.2018.01.005

Ghani, R. A., Samah, A. R. A., Baharuddin, N. S., & Ahmad, Z. (2023). Determinants of Firm Value as Measured by the Tobin’s Q: A Case of Malaysian Plantation Sector. International Journal of Academic Research in Accounting Finance and Management Sciences, 13(2). https://doi.org/10.6007/ijarafms/v13-i2/17268

Gormsen, N. J., & Lazarus, E. (2023). Duration‐Driven Returns. The Journal of Finance, 78(3), 1393–1447. https://doi.org/10.1111/jofi.13216

Görtz, C., Sakellaris, P., & Tsoukalas, J. D. (2023). Firms’ Financing Dynamics around Lumpy Capacity Adjustments. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4339163

Graham, J. R., & Leary, M. T. (2011). A Review of Empirical Capital Structure Research and Directions for the Future. Annual Review of Financial Economics, 3(1), 309–345. https://doi.org/10.1146/annurev-financial-102710-144821

Graham, J. R. (2022). Presidential Address: Corporate Finance and Reality. The Journal of Finance, 77(4), 1975–2049. https://doi.org/10.1111/jofi.13161

Gürkaynak, R. S., KARASOY‐CAN, H. G., & Lee, S. S. (2022). Stock Market’s Assessment of Monetary Policy Transmission: The Cash Flow Effect. The Journal of Finance, 77(4), 2375–2421. https://doi.org/10.1111/jofi.13163

Hoberg, G., & Maksimovic, V. (2021). Product Life Cycles in Corporate Finance. Review of Financial Studies, 35(9), 4249–4299. https://doi.org/10.1093/rfs/hhab134

Isibor, A. A., O., A., O., & K., A., O. (2024). Dividend Policy and Value of the Firm: A Qualitative Approach. International Journal of Entrepreneurship and Business Innovation, 7(4), 104–110. https://doi.org/10.52589/ijebi-rtnhwloe

Jones, E., Danbolt, J., & Hirst, I. (2004). Company investment announcements and the market value of the firm. European Journal of Finance, 10(5), 437–452. https://doi.org/10.1080/1351847032000168696

Kermani, A., & Ma, Y. (2022). Asset Specificity of Nonfinancial Firms. The Quarterly Journal of Economics, 138(1), 205–264. https://doi.org/10.1093/qje/qjac030

Kogan, L., & Papanikolaou, D. (2013). Firm Characteristics and Stock Returns: The Role of Investment-Specific Shocks. Review of Financial Studies, 26(11), 2718–2759. https://doi.org/10.1093/rfs/hht026

Koijen, R. S. J., Richmond, R., & Yogo, M. (2023). Which Investors Matter for Equity Valuations and Expected Returns? The Review of Economic Studies, 91(4), 2387–2424. https://doi.org/10.1093/restud/rdad083

Leary, M. T., & Roberts, M. R. (2005). Do Firms Rebalance Their Capital Structures? The Journal of Finance, 60(6), 2575–2619. https://doi.org/10.1111/j.1540-6261.2005.00811.x

Liu, W. (2017). Trade-off theory of capital structure: evidence from estimations of non-parametric and semi-parametric panel fixed effect models. Investment Management and Financial Innovations, 14(1), 115–123. https://doi.org/10.21511/imfi.14(1).2017.12

Mansour, M., Yamin, I., Saram, M., Alduwailah, A., Al-Enzi, N., AlWadi, B. M., & Marei, A. (2024). Capital structure and performance nexus: Insights from fixed-effects and quantile analysis. Journal of Infrastructure Policy and Development, 8(7), 5119. https://doi.org/10.24294/jipd.v8i7.5119

Marsheila, & Marpaung, R. J. H. (2026). KEBIJAKAN DIVIDEN MEMODERASI DAMPAK FAKTOR INTERNAL TERHADAP NILAI PERUSAHAAN PADA INDEKS KOMPAS100 TAHUN 2019-2023. Referensi Jurnal Ilmu Manajemen Dan Akuntansi, 13(2), 35–44. https://doi.org/10.33366/4cqkpb96

Mazumdar, M., & Mara, D. . O. (2024). Analysing the Impact of Capital Structure on Firm Value: A Study in Corporate Finance. International Journal for Research in Applied Science and Engineering Technology, 12(10), 1191–1199. https://doi.org/10.22214/ijraset.2024.64754

Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3), 574–592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x

Nagel, S., & Xu, Z. (2021). Asset Pricing with Fading Memory. Review of Financial Studies, 35(5), 2190–2245. https://doi.org/10.1093/rfs/hhab086

Nguyen, T. (2025). Theoretical Framework Of Capital Structure Threshold And The Impact Model Of Capital Structure Threshold On The Firm Value Of Listed Companies In Vietnam. International Journal of Education, Business and Economics Research., 5(3), 360–370. https://doi.org/10.59822/ijeber.2025.5318

Nurdyastuti, T., Suroto, S., Kurniawati, K., & Gustina, V. A. (2025). FIRM VALUE: A HYBRID SYSTEMATIC LITERATURE REVIEW (SLR) AND BLIBLIOMATRIC ANALYSIS. International Conference of Business and Social Sciences, 916–929. https://doi.org/10.24034/icobuss.v5i1.734

O, R. D. la, & Myers, S. (2021). Subjective Cash Flow and Discount Rate Expectations. The Journal of Finance, 76(3), 1339–1387. https://doi.org/10.1111/jofi.13016

Pangestuti, D. C., & Tindangen, A. M. L. (2020). The Influence of Internal and External Factors on Firm Value. European Journal of Business Management and Research, 5(5). https://doi.org/10.24018/ejbmr.2020.5.5.492

Putri, I. G. A. P. T. (2020). Effect of capital structure and sales growth on firm value with profitability as mediation. International Research Journal of Management IT and Social Sciences. https://doi.org/10.21744/irjmis.v7n1.833

Qureshi dan Sharif, 2012, Qureshi, S. U., & Sharif, S. (2012). Impact of TQM practices on firm’s performance of Pakistan’s manufacturing organizations. International Journal of Academic Research in Business and Social Sciences, 2(10).

Qureshi, M. A. (2007). System dynamics modelling of firm value. Journal of Modelling in Management, 2(1), 24–39. https://doi.org/10.1108/17465660710733031

Reboredo, J. C., & Ugolini, A. (2022). Climate transition risk, profitability and stock prices. BOA (University of Milano-Bicocca), 83, 102271. https://doi.org/10.1016/j.irfa.2022.102271

Riandawa, R., Heniwati, E., Fahmi, M., Helmi, S. M., & Dosinta, N. F. (2025). The Mediating Role of Capital Structure in the Relationship between Profitability and Firm Value: Evidence from the Indonesian Manufacturing Sector. International Journal of Finance and Business Management, 3(6), 607–624. https://doi.org/10.59890/ijfbm.v3i6.125

Santosa, P. W., Aprilia, O., & Tambunan, M. E. (2020). The Intervening Effect of the Dividend Policy on Financial Performance and Firm Value in Large Indonesian Firms. International Journal of Financial Research, 11(4), 408. https://doi.org/10.5430/ijfr.v11n4p408

Siregar, S. D., Toni, N., & Ariesa, Y. (2023). Impact of dividend policy, capital structure, and profitability on consumer goods firm value: Role of firm size (2013-2022). Journal of Economics and Business Letters, 3(4), 38–48. https://doi.org/10.55942/jebl.v3i4.234

Soviatun, N., & Rudianto, D. (2024). Pengaruh Kebijakan Manajemen Keuangan Terhadap Nilai Perusahaan. Journal of Economics and Business UBS, 13(2), 503–515. https://doi.org/10.52644/joeb.v13i2.1559

Syahfitri, D. I. (2025). Interaksi Nilai Pasar, Pertumbuhan, dan Struktur Modal pada Kebijakan Dividend Payout. Ekopedia Jurnal Ilmiah Ekonomi, 1(4), 3395–3412. https://doi.org/10.63822/6cjyz717

Thành, C. N. (2014). Threshold Effect of Capital Structure on Firm Value. International Journal of Finance & Banking Studies (2147-4486), 3(3), 14–29. https://doi.org/10.20525/ijfbs.v3i3.186

Tosun, O. K. (2021). Cyber-attacks and stock market activity. International Review of Financial Analysis, 76, 101795. https://doi.org/10.1016/j.irfa.2021.101795

Vaswani, V. (2026). Corporate Finance: Its Importance and Role in Maximizing Firm Value. International Journal of Advanced Research in Science Communication and Technology, 197. https://doi.org/10.48175/ijarsct-30835

Warusawitharana, M. (2007). Corporate asset purchases and sales: Theory and evidence☆. Journal of Financial Economics, 87(2), 471–497. https://doi.org/10.1016/j.jfineco.2007.02.005

Wu, J., Zhang, L., & Zhang, F. (2009). The q‐Theory Approach to Understanding the Accrual Anomaly. Journal of Accounting Research, 48(1), 177–223. https://doi.org/10.1111/j.1475-679x.2009.00353.x

Xing, Y. (2007). Interpreting the Value Effect Through the Q-Theory: An Empirical Investigation. Review of Financial Studies, 21(4), 1767–1795. https://doi.org/10.1093/rfs/hhm051

Yahya, A., Triwibowo, E., Sari, A. K., & Kartika, D. (2024). CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE, INSTITUTIONAL OWNERSHIP, AND ASSET GROWTH TO IMPROVE FIRM VALUE. JOURNAL OF APPLIED MANAGERIAL ACCOUNTING, 8(1), 59–71. https://doi.org/10.30871/jama.v8i1.7392

Yan, C., Mao, Z., & Ho, K. (2022). Effect of green financial reform and innovation pilot zones on corporate investment efficiency. Energy Economics, 113, 106185. https://doi.org/10.1016/j.eneco.2022.106185

Yu, E. P., & Luu, B. V. (2021). International variations in ESG disclosure – Do cross-listed companies care more? International Review of Financial Analysis, 75, 101731. https://doi.org/10.1016/j.irfa.2021.101731