Jurnal Manajemen Kewangan CAPITAL STRUCTURE DETERMINANTS AND IT'S INFLUENCE TO VALUE OF THE FIRM ‘Wholesale and Retail Companies Listed at Indonesia Stock Exchange 2008-2012 Shelly Erman Munzir Universitas Esa Unggul — Sakari Email eshell 1 708ziyahoo.com ABSTRACT Every year, wholesale and retail indostry in tndonesia always grovw positively, even in the Asia Pasific region its the fastest. Therefore, investors see this as one of promising investment but Indonesia Capitul Market Dircctary data indicates that most of wholesale and retail company is a high risk company, defined by company capital structure Because of that ‘before making decision to investment, investor noed lv unalyze finmncial repert to know determinams of capital structure and iss influence to valtie of the fitm. Analysis. sas performed using financial statement data of 21 wholesale and retail companies listed on Indonesia Stock Exchange in 2008-2012 using path analysis to see the direct und indirect influence of independent wanable ( liquihty, profitability wn firm size) to dependent variable (value of tise firm and capital structure) and whether the © structure is am intervening variable . Results ‘of analysis proved. thal independent variates simultaneously and partially significant influgace to eapiial struciure but il dowstr't significant t influence ta value of the firm but if its through capital structure, then its partially and simuluineously significant influence 10 value of the firm, Its moans that capital struchere is proven as an intervening variable. fey words + whatesate, rea, daretment, expel sect, valne of the firm, determinant, ly, Profit, fron ie, path amas, terreno INTRODUCTION fos etnies tn financial analysis, imvestor will analyze financial statements Inthe financial “statements, investors will find information about the company’s capial which always grow) Given the huge strictire. market growih, ils reasonable if investors ‘The capital structure is a somec of see this as a business opportunity and ‘corporate finds and a combination of debt wholesale and retail industry became one and equity in the company long term isi financial structure. The Company ashieh 15 Dipindai dengan CamScanner =Con M Market Directory in the petiod 2OLA-2012 shenwed us tht the wholesale coupe bonds 8 Sos) igh. slagone of fish r structure and how it’s) has nwo rules, the rule arc sing Internal fimds-and issuing: scouriticy hat have minimal risk. Mocking oeder theory iinplies that if the source of fens frum the evmpany is required then firstly the company need tm isue stebt before issuing shares, Only if the capacity” ‘the: fo wee debt reaches iro ee, ‘consider to issue stock. Considering there wre various kinds of debi. the pocki a and equity. Sources of fund that comes fro outside is obtained from trun wr dcbt (both short. and long term) white the source fof funds: fram the capital obtained frum equiy itsel! (share capital, remined eamings and reserves), ceumpsany wing AM an i's rca that the eompaty bs tet Higpald aid Hrs a heh ewe el risk, Cota auc cory explains th Jong-term expenditure polickes teat may freee hernia ‘OF the fiers, tse eat aa ‘eupital of the company ana the company’ Mack price ay well in combination fomp-tcrmr deb that est make optimal capital viructure, Optimal capital structure bs a capital structure thot tmaimtiees. the of the fie oe th mininize the oot of capital of the apa snicaive fe the deter structure, sunagers oF exonumists nocd tn take evidknoe exists bn the real wrk The Fira capital sarvctura theory is karan by Franc Modlin! af! Merton A i. the capital struchate using funds from debt does ot have any inflence wn the salve of the firm, but when it bagan to consider ter wie the tix fictwr, the iiss of eebt veill always he more profitable and cun inerewse the value of the fire, assairing that when it used ahere is sto bankrupic) eons, ne transaction foes and interest on loans sand deposits wo’ the ‘samme deposit for individuals oF comnpanies, Frade off theory saying thot if companies use leverage, then the company would get benefit from tax savings, but in the other side the company need in calculate 2.c0e4s than would arbse trom the unc of leverage, such as bankruptcy conts sand apency emis incewased a a resalt of — Dipindai dengan CamScannerJumal Manajemen Kevangan | 215 decline in the credibility of feown 2005), eee Signaling theory explains ‘the company is seg peia ‘tend to increase the amount of debt, due the additional interest payments and income before taxes. Companies that predict lower profits will tend to use low debi levels High corporate debt will increase the possibility thet the company faced financial difficulties, The more Successful 1 company, the possibility to use mote debi is increasing Companios can use the additional interest 10 reduee the bigger tax on corporate profits. The more secure the company in terms of financing, additional debt only slightly increase the risk of bankruptcy. Rational company would increase the debt if additional debt can increase profits while rational investor would see debt as a signal of an increase in the value of the firm. ‘Here are the factors that may have a! ‘Significant impact on the optimal capital stcucture, the stability of sales, asset Petia pa ity, tax, l attitude, the attitude of tenders and intemal conditions cerporate. oer flexibility (Weston and ‘Brigham, 1997), ‘The value of the Firm The Company is an organizati ar combines anit organizes various resources: for the purpose of producing goods and services for sale (Salvatore, 2005}. The ‘company’s main purpose according to theory of the firm is to maximize the value ‘of the finn. Maximizing the value of the firm is very important for a company, Seems wth mate te nie of De company also means maximizing shareholder wealth, The company's value is the market value of enterprises securities (Keown, 2005) _ Ta [Mock price! High stock price made the high value of the firm. The high value of the company will make the matket believe not only on the company's performance: today, but alse on the company’s prospects in the future, Shares are proof of ownership of a person OF entity agains! a company, Companies that need funds in the form of equity cant be acquired through the issuance of shares, The shares can be sold dircctly to the owner of the funds or the investors or the geencral public through the stock market. Stock retum 1s the rate of profit earned by the owner oF investor funds on short-term sock investments and long~ term stock invesunent, A rational investor would consider two things when making inveaments, that is the expected return and risk. ‘Liquidity Liquidity 15 the ability of a company to poy bills in the short term without discupting operations. In the balance sheet, the company’s liquidity is characterized by the division of current assets divided by short-term debt. A company that able to poy all its financial obligations called liquid company, and a campany that has no able to pay all its Financial obligations. called ilikuid company, A company rate of) ee ea etn ce civileig assets value to short-term debt fs Poth than 1. In general, investors in making invesument also saw the company's liquidity 50 thas liquidity is also affecting the company's capital structure. Investors who invest will increase long-term debt or short-term debt, and it changing the capital structure of the company. Profit distributed to shareholders called dividends will cause the company requires extemal funding thereby increasing company ‘anion debt or short-term debe > Dipindai dengan CamScannerJurnal Mansjeneen Ketan sand retained camitigs couse the company ‘have additional funds capital resulting in a change of componate capital and a reduction in the use of the loan / debt. Therefore, it can influence the company —eapital structure. Profitability is important in the company's survival in the long term, because the profitability indicale whether the company has good prospects in the future, Fach eampany will always try to improve ity profitability, because the higher the level of peotiubility of a company, the survival af the company well be more secure, Increascd profitability indicates that the perfurmance of manazcment in managing: operational source of funding to penetrate net income increased and more cilicient, so it car be said thot ip addition iv the efficient management in manaying the investments of the company, investors also pity attention to the = performance of Hanagerenl —cupathe oF mamauiny resources, Coe aes Some “company's prospects are better clue to the “potential for increased corporate profits ‘This is captured by investors as a positive signal of the companics that will increase investor confidence amd facilitate the management of the company te stract cnpital in shares. If there ix on increase demand for shares of a company, thea it will indircetly raise the company’s valuc in the stock market Firm Sire (Firm size destribed the size of the pifpany, Firm size indicated by total sales, otal assets and the average level of sales (Seflianne, 2011). Total assets ms the use of funds affect the capttal structure because it determines haw a company should provide funds to finance its assets which led 10 change the compasition of the debt and equity of the company. Companies with lage size have reater access and wide to obtain external sources of financing, so condition to obtain ‘loan would be easier bocause il is said thal companies wath latye: have a greater chance to win the compctition oF 10 Saitvive tn the industry Largs companies have _ many advantages compared Se companies "The Advantages: with large sive 19 if eam determine of ease companics jo obtain funds from the ‘Sapital musket, the size of the company: determines, baryaininy power in financial, ieee = ra can cam more profit (Sawie, 2006) PREVIOUS RESEARCH Margaretha and Rivky (2010) conduerci! a study with dependent wariabke used 1s capital structure and independent variables used were firm sive, tangitnlity, Profitability, yrorwth, nom-debt tax shiek, age amd ‘The object of research was 40 manulactire companies listed the Stock Exchange in the period 2565+ 2008, thin research using multiple tepression analysis Ihe conclusion from these studies is yenerally peofitahility, liquidity, growth and nonteht tax shicld has influcace with caiphtal structure, hike the the company sieg, tangibility, aye and investment trud no influence Im this research, Maxgaretha and Rizky ¢20/0) measure the influence of | variables in short-term capital structure and long-term capital structure. in shor term capital structure, the variables that uve gn influence is tangibility, profitability, liquidity, yrowth, non-dcht fax chick) and the age ef the company , while firm size and investment variable hos no effect. In Long-term capital structure, the variables that have an influence firm size, wngibility und non debt tax shicld, while profitabitity, Viquidity, growth, age and investment variable has no efFeet tami (2009 } conducted a study with dependent variable used is capital structure and independent vanables used were firm size, business nsk , growth rate, —--- Dipindai dengan CamScannerJumal Manajenven Keuangan Structure of asset and profitability, The object of resenrch was 10 manufacturing listed on the Stock Exchange in the eat this preter f repression Seunivie ner aun ale | oe and yrowth rate have to capital structure while the ‘“Mructure of asset and profitability have > positive influence to capital structure ‘Kartika (200%) conducted a study with dependent variable used is capital structure and independent variables used are business risk, structure of assct, profitbility, firm sire. ‘The object of research was 7] manufucture: companies listed of the Stock Exchange in the period 2004-2006, this rescarch using multiple fegression analysis, Tho conclusion from these: studies is business risk does not have an influence to capital structure while structure asset, profitability and firm size significant positive have an inflacnce to capital structure, Ganerse and Suarjaya (2014) conducted a study with dependent variable used is stock retums and independent vanables used were liquidity, profitability and firm size. ‘The object of research was 16 food und beverage compunics listed on the Stock Exchange in the period 2008- 2011, this texeurch using multiple linear regression analysis The conclusion fram these studies ig variable profitability, Kiquidity and firm size simultancously significant influence to stock returns, but only variable profitability and firm size is petal significant influence to stock sable and Malik (2012) conducted a study. with variable used is leverage of firms and independent variables used are profitability, liquidity, firm size and tangibility. The object of research was 5 pakistan oil and gas companies in the period 2005-2010, this research using multiple regression analysis ‘The conclusion from these studies is profitability variable is negatively influence to leverage of firms while the ether variables showed 4 positive ‘elation with leverape af fires Safitn, Sinarwati and Atmadps (2015) conducted « snady with dependent variable used is stock returns and independent — variables wel _are Profitability, liquidity and leverage. The object of research way $$ manufacture companies listed on the Stock Exchange in the peenvad 2009-2013, thrs research wrumg multiple regression analysis, The: conclusion from these studies is variable profitability, liquidity and leverage situltancouly significant influcnce wo k rotearn WYPOTHESIS Liquidity Influence To Capital ‘Structure Liquidity W the ability of a fo pay bills in the short term sisruing cpa In the balance: ‘the company’s liquidity ts characterized by the division of current aseets divided by short-term debt A company that able in pay all its financial obligations called Tiquid company, and a company that has na able to pay all its financial obligations called ilikuid company. A company rate: liquid is when the value of the divinian of GuirTent assets value to shartterm debt. is oe than I In general, imestots in making investment also saw the company's gui 0 that liquidity is also the company's capital structure! Investors who invest will increase long-term debt or short-term debt, and it changing: the capital structure of the company. It is supparted research conducted by Farah Manaretha and Rizky Aditya Ramadhan (2010). The result showed that the liquidity has influence to capital structure: Based on the desenption above, the first hypothesis formulated in this study are as ‘allows > Dipindai dengan CamScannerJurnal Manajemen Keuangan Profitability Structure Influcnce To Capital shareholders called dividends will cause the company requires external funding thereby Ce ann en oc aer eeieaae ‘und retained earnings cause the comy have odditional funds capita) realities change of corporate capital and ateductian itt the use of the loan / debt Therefore, it can influence the company —cupital structure. Endang Sri Utami (2009) in his research using variables profitabtity with the results of positive effect on the profitability of the capital structure Based om the description ubove, it can be formulated the ‘hypothesis in this study is is follows ee See Firm Size Influence To Structure ag ns the size of the ‘company, Firm size indicated by total | eee average level off ‘Seftianne, 2011), Total assets as the use of funds affect the capital structure because it determines how o should provide funds to finunce its assets which led to change the composition of the debt and equity of the company. Andi Kartika (2009) conducted a study which ‘has the result of firm size significantly inlucnce the cupital structure. Based on the description above, 1 can be formulated third hypothesis in this study is wx follows 13: If the size of the company has increased, then the capital structure will be increased. Capital Liquidity Influence To Value of The Firm ‘Anan investar would see the level of liquidity of the company when investments. The liquidity of the cornpany reflect the level af activity ofa stock traded on the stack exchange, the mor: di for the go increase [price Based on the description above, it ‘can be formulated fourth hypothesis tn this et follows na ae ‘the firm, = Profitability Influence To Value of The Fil Pecking order theory states that the ‘Company with high level of peafitabitity show a low levels of debt, because the high profitabitity company has a abundant sgurces oF intemal funds (Breadley, Myers, & Marcus, 2007), Companies that have a low level of debt will attract investors to Invest or increase investor confidence dive to high proftability demonstrate the effectiveness and efliciency of corporate management in running the operation. Increased investor confidence that could tise the company’s value in the stock market. Based on the description above, it cun be formulated fifth hypothesis im this study 4 isas follows HS; lfthe tras inc ‘then the value of firm will / Firm Size Influence To Value of The Firm ‘The size of the company is an important factor in the formation of the company's value. Larger companies. can generate earings grealer and petting & higher return thin smaller companies. This is supported by reseurch conducted Ganerse and Sungjaya (2014) which result show that the size of the company pustiully ‘positive significant effect on stock returns, if the size of the company large then the stock retums generated will be higher. Based on the description above, it can be formulated sixth hypothesis in this study is > Dipindai dengan CamScannerJummal Manajenten Keuangan Capital Structure Influence to Value of the Firm equi ‘salve ofthe firm, The eaphalstrcture can be calculated through Debt to Equity Ratio (DER), Currently there are no rules. that determine the thir value of DER. but generally DER value should be less than 1, because the DER value more than | indicates that the company ts nunmiry: their opemtion ning debt higher than the ‘equity, [t's means that the company is high level nek Investors when sexing a high lever nish ofthe company will reconsider whether the risk taken is balanced with the fate of return earned, This is supported by: Ho research conducted by San and Abundanti 42012) which has the result thot the capital structure negatively affect the value of the: company, Based on the description above, ‘it-can be formulated seventh hypothesis in this study is as follows WT fhe ervetute of te epi inctese ‘the value of the firm will decline. The relationship between the variables jn ths study illustrates the relationship of dependent variable with independent variables. [ty shows one to one relation from 3 variables to dependent variable and describes the intervening variable. Here i ‘a picture of the research model rn 18 pera mt Structure Lae Profiability |_ Value af The “a me mz | Firm Size |! iy an - Picture | Research Model RESEARCH METHODS Reieaveh Desige ‘This research using clause design, which is looking for direct and indirectly relationship or influence berseen the variables of liquidity, firm size to capital gestae ‘he fim, Data Collection ——“Teehmiques _ ‘This study using. i secondary data financial report of 21 wholesale and retail companies. The sources of secondary data is Indonesia Capital — Market Directory issued by the Indonesia Stock Exchange in 2010-7013 containing financial data from: petiod 2008-2012 The sampling technique using purposive sampling method. [tis 2 method of sampling with particular consideration 7 Dipindai dengan CamScanner