The Impact of Decision Investment, Capital Structure and Growth on Profitability and Company Value in Manufacturing Sector of Firms in Indonesia
Hikma Niar
Correspondence Email: nhieart@gmail.com
ABSTRACT
Purpose of this study is to analyze investment decisions, profitability, capital structure, company growth and firm value population 149 manufacturing companies with 55 samples. Used Analysis Path. The results of the study show that the results of this study are expected to contribute to the development of financial management studies.
Keywords: Investment Decision, Capital Structure, Growth, Profitability and Corporate Value.
1. INTRODUCTION
Almost all investments contain uncertainty or risk. Investors do not know for sure the results to be obtained, so investors can only estimate what the expected profit is and how far the actual results deviate from the expected. Investment options cannot only consider the expected return but also the level of risk that will be faced. To ensure that the companys goals can be achieved and determine the effectiveness of the operations companys in achieving the goal (Haruman, 2008). However, based on the theory of capital structure, capital structure when the position is above the target capital structure lengths, then any increase in debt will lower the value of the company. The essence of the trade-off theory of capital structure is to adjust benefits and tradeoffs that arise from the use of debt. As far larger benefits, additional debt is still allowed. When sacrifice for a greater use of debt already, the additional debt is not allowed (Kusumajaya, 2011).
The growth of manufacturing industry in Indonesia, namely at the beginning of the New Order, the manufacturing industry is relatively slow to growth. That is because the original local industry is still small, almost all types of machines to be imported. Causing the government should provide strict controls on imports, and this restriction is a serious obstacle for building industries. The companys growth is a prospect for any reason the company can provide the positive aspects of the company, as investment will be invested in the hope of providing a high return. Because of this high-growth companies will be interested in its shares by investors (Fanani, 2010). Growth is how far the company put itself in the overall economic system or economic system for the same industry. In general, companies that grow quickly obtain positive results in the competitive world of business, enjoy increased sales significantly and are accompanied by an increase in the market. So, companies with a high growth rate require more funds in the future, especially external funding to meet the investment needs and to satisfy the need to finance its growth.
One of the companys values is determined by profit, low profit and quality will decide the users of financial statements to be biased. Profit reflects the ability to make a profit in relation to sales, equity and total assets (Soliha and Taswin, 2002). Profit is the main attraction for the owner of the company as a result of the profit earned by the fund management business in investment by shareholders and also reflects the distribution of benefits they are entitled. Companies with high levels of profitability will demand shares by investors so as to increase the companys value (Mardiyati et al. 2012). The growth of manufacturing companies listed in Indonesia Stock Exchange the upward trend in sales, asset growth has also increased and profit growth volatility. The increase Asset and capital does not necessarily give rise to a gain or in other words not guarantee the capital asset and profit growth proportionally.
- BACKGROUND
Firmrsquo;s value
The firmsrsquo; value is the price that potential buyers are willing to pay when the company was sold (Husnan, 2004). Other scholars view describes the company as the market value of debt and equity securities of companies that are outstanding (Keown, 2004). The value of many companies interprets meaning that the value of the company reflects the present value of the
expected income in the future and reflects the value of the company is the result of a decision taken by the financial manager of the companys stock price. The higher the stock price the higher the value of the company. The high value of the company to the wishes of the owner of the company, for a high score indicates prosperity shareholders also high (Keown 2000: 555).
The investment decision
Financial managers should help companies identify promising projects and decide how much wills the investment in each project. On the other hand, investment decisions also referred to the decision of the capital budget, because most companies provide an annual operating budget consists of capital investment Certificate (Brealey et al, 2008: 4). The investment decision-making concerning the allocation of funds both funds from the company and the funds that come from outside the company in various forms of investment both short-term investments and longterminvestments (Ningsih and Indarti, 2012). Investment can reflect the companys growth in economic activity and business conduct. Decision-making on investments is usually difficult, since it requires an assessment of the situation in the future that are not easy to predict because of the uncertainty in the future (Ayuningtyas, 2013).
The value of a company depends on the companys production in the future (Fitriana and Pangestuti, 2014). Investment decisions positively and significantly to the value of the Company (Fenandar and Raharja, 2012; Qadariah, 2013).
Capital Structure
The capital structure is a mixture or blend of debt, preferred stock, common stock of that company in the capital structure of the company (Brigham and Houston, 2010: 15
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