JURNAL
Riset Akuntansi dan Keuangan Indonesia URL : http://journals.
id/index.
php/reaksi/index THE EFFECT OF LIQUIDITY AND CAPITAL STRUCTURE TO INCREASE
FIRM VALUE THROUGH INCREASING
FINANCIAL PERFORMANCE
Imronudin*.
Jati Waskito.
Ikeke Bunga Cantika.
Gramitha Sofiardhani Management.
Economic and Business Faculty.
Universitas Muhammadiyah Surakarta *email: imronudin@ums.
Keywords:
Capital Structure.
Liquidity.
Growth.
Company Size.
Firm Value.
Financial Performance.
ABSTRACT
This study analyzes the effect of capital structure, liquidity, company growth, and size on firm value.
This study uses financial performance as a mediating variable.
The object of this study is Manufacturing Companies listed on the Indonesia Stock Exchange for the 2020 period.
Using a purposive sampling technique, the sample in this study consisted of 150 The data collected from the financial statements are then analyzed using multiple linear regression.
The study results show that capital structure positively and significantly affects firm value.
Likewise, financial performance shows a positive and significant influence on firm value.
The capital structure negatively affects firmsAo value.
Liquidity variables, and company growth, partially do not affect firm value.
When testing whether there is a mediating effect, it is found that financial performance cannot mediate the relationship between capital structure and firmsAo value.
Furthermore, financial performance can mediate the relationship between sales growth and firm value.
p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia
INTRODUCTION
Nowadays, commercial competition has undoubtedly intensified.
Companies try to achieve their goals by maintaining the advantages they have.
An efficiently managed company will ultimately survive and win over the match.
Manufacturing companies are one of the companies that are no less fierce in competition.
The manufacturing industry is vital to the economy.
Investors demand stocks in the manufacturing industry incredibly (Yanti and Darmayanti, 2.
One of the companyAos performance is measured by the companyAos ability to generate profits.
The higher the profit generated by a company, the higher the companyAos financial performance.
The higher performance reflects good corporate management.
Maximizing the prosperity of shareholders is a general goal to be achieved by the company.
This increase in shareholder prosperity is achieved by increasing the companyAos value, as reflected in the companyAos share price.
With rising share prices, the wealth of company owners also increases (Rahmatullah, 2.
The capital structure is the companyAos financing mix from external and internal sources.
A capital structure that is not optimal will result in high capital costs.
This capital cost is a fixed cost that carries a risk if there is a high fluctuation in sales.
Therefore, companies must find the most optimal combination of debt and equity (Romadhoni and Sunaryo, 2.
In terms of asset management, liquidity is no less important to note.
Liquidity is an asset whose amount changes at any time because of the companyAos operations.
Liquidity is used to meet short-term obligations.
Too few assets compared to the companyAos regular operating needs will disrupt the companyAos operations.
the other hand, if too many assets are above the normal requirement, liquidity unemployment will occur, increasing costs.
A liquid company is a company that has current assets above its current In addition to ensuring the continuity of company operations, the number of current assets above current liabilities can also be used to meet unexpected needs (Yuliani, 2.
Sales growth reflects good company management, especially from a marketing perspective.
The current increase in sales can show company growth compared to the Vol.
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3 Desember 2022 previous period.
This study uses regression to analyze the effect of variables on liquidity, capital structure, firm size, and financial performance on firmsAo value.
Furthermore, this study uses financial performance as a mediating variable.
The results showed that financial performance could not mediate the effect of liquidity and firm size on firm value.
However, financial performance significantly mediates the effect of sales on a firmAos value.
After explaining the background and alluding to methods and results in section 1, section 2 reviews the relevant literature.
Section 3 contains data and research methods.
Section 4 presents the results and discussion.
Finally, section 5 contains the conclusion.
LITERATURE REVIEW AND HYPOTHESES
FORMULATION
The company value can be in the form of book value or market value.
The companyAos market value is the multiplication value of the market price of a companyAos shares multiplied by the number of outstanding shares.
Therefore, the companyAos value will also increase if the stock price rises.
Financial performance is an indicator of the board of directorsAo success in managing its Financial performance reflects the selection of funding sources, investment activities, and operational activities carried out by the The incentives given to the board of directors also depend on how well the company is performing (Brigham and Houston, 2.
Capital structure is a combination of the proportion of capital that comes from internal and external sources (Van Horne, 2.
Capital structure is the long-term financing of a company, a ratio of long-term debt to equity (Brigham and Daves, 2.
So the capital structure is the mix of long-term debt and equity that the company uses to fund its operational activities (Harsono and Pamungkas, 2.
Liquidity is the companyAos ability to fulfill its financial obligations, which must be fulfilled The measure of liquidity is indicated by the liquidity ratio, which is the ratio between current assets and current liabilities.
The higher the companyAos liquidity, the more able the company is to fulfill obligations that must be fulfilled immediately.
Imronudin et al.
Vol.
7 No.
3 Desember 2022 JURNAL Riset Akuntansi dan Keuangan Indonesia Calculating this liquidity ratio is sufficient to provide benefits, especially for suppliers who are interested in the companyAos ability to meet its shortterm obligations (Harsono and Pamungkas, 2.
A capital structure with a high proportion of debt will result in high fixed costs which in turn can reduce the companyAos profits.
Therefore, an inappropriate capital structure policy will affect the companyAos financial performance.
Research by Yuliani .
states that partially the capital structure variable has a negative effect on financial Research by Ullah et al.
, .
shows that capital structure has a negative and significant relationship with financial performance.
H1: Capital structure has a negative effect on financial performance.
The current Ratio shows how current assets can cover current liabilities.
The greater the ratio of current assets and current liabilities, the higher the companyAos ability to cover its short-term debt.
If the CR value is high, it means that the company can meet its current obligations.
A low Current Ratio generally carries more risks than a high CR.
A low CR shows that company leaders use current assets very effectively if the balance is adjusted to minimum requirements (Sukmayanti and Triaryati.
However, if the companyAos CR is too high, it can have an adverse impact on the level of profit Therefore, companies need to maintain the companyAos liquidity level (Fajaryani and Suryani, 2.
Research by Yuliani .
states that the liquidity variable partially has a positive and significant effect on financial performance.
In theory, the efficiency of liquidity management will determine the size of the companyAos profits.
Efficient management of current assets determines the companyAos profit.
Based on this description, the following hypotheses can be proposed:
H2: Liquidity has a positive effect on financial Sales growth shows the level of change in sales from year to year.
The higher growth rate of a company will rely more on external capital.
Sales growth shows the extent to which a company can increase its sales compared to total sales as a whole.
Research by Yuliani .
states that capital structure, liquidity, and sales growth have a simultaneous effect on financial performance.
The Effect of Liquidity.
p-ISSN:1411-6510 e-ISSN :2541-6111 Variables sales growth has a significant effect on financial performance.
Similarly.
Ullah et al.
, .
found that sales growth has a positive relationship with financial performance (Ullah et al.
, 2.
Based on the description above, it can be proposed the following hypothesis:
H3: Sales growth has a positive effect on financial Company size is one of the factors considered in determining how big a policy or funding decision .
apital structur.
is in meeting the scale of a company.
One of the benchmarks that shows the size of a company is the total assets owned by the company.
The bigger the company, the bigger the funds spent.
In addition, the larger the company size, the easier it will be for the company to obtain funding sources, both internal and external (Harsono and Pamungkas, 2.
Research by Hirdinis .
states that company size has a negative and significant effect on financial Similarly.
Harsono and Pamungkas .
show that company size affects the companyAos financial performance.
Based on the description above, it can be proposed the following hypothesis:
H4: Company size has a negative effect on financial The capital structure has a significant effect on the companyAos financial performance.
The increasing proportion of debt will have an interesting effect on financial performance.
Interest expenses will increase if there is an increase in the use of debt and will have an impact on reducing the effectiveness of assets in generating profits.
However, the increase in debt has a positive effect on profits.
Increased debt will increase the number of resources that can be used to maximize business opportunities (Kristianti, 2.
The capital structure is also needed to increase the value of the company because the policy of using capital structure can determine profitability.
An appropriate funding policy is needed from the company so that it can fulfill the companyAos operational activities (Harsono and Pamungkas, 2.
Optimal capital structure is a comparison of the use of long-term capital in the form of longterm debt and own capital which produces the lowest cost of capital.
This capital structure policy will affect company value (Yanti and Darmayanti, p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia Empirical evidence about the effect of capital structure on company value has been reported by previous researchers.
For example, (Sari and Sedana, 2.
found that capital structure has a negative effect on firm value.
Based on the theoretical explanation and empirical support above, the following hypotheses can be proposed:
H5: Capital structure has a negative effect on firm Liquidity is the companyAos ability to fulfill all of its short-term obligations.
A company is said to be in a liquid state if the company has current assets above its current liabilities.
With the number of current assets above current liabilities, it allows the company to pay off its short-term obligations at maturity.
Good liquidity management will increase the value of the company.
The positive effect of liquidity on firm value is shown by research conducted by (Yanti and Darmayanti, 2.
which states that liquidity has a positive and significant effect on firm value.
Jihadi et al.
, .
also found the same thing, namely that liquidity has a positive effect on firm value.
Based on the description above, the research proposed the following hypothesis:
H6: Liquidity has a positive effect on firm value.
Indicators of company growth can be seen in sales growth (Hidayat, 2.
The companyAos growth in a certain period is reflected in its sales growth which also shows the companyAos performance (Isnawati and Widjajanti, 2.
Research conducted by Yuliani, .
shows that company sales growth has a positive and significant effect on company performance.
Likewise, research conducted by Ullah et al.
, .
states that sales growth has a positive and significant relationship with financial performance.
Based on the description above, the following hypotheses can be H7: Sales growth has a positive effect on firm value.
Firm size is predicted to be a determinant of firm value.
Large companies have a better ability to manage the company.
Large companies are also trusted by many creditors so that they can freely choose sources of capital at low costs.
With its ability to reduce costs, the company will be able to improve its financial performance.
Research conducted by Harsono and Pamungkas .
Vol.
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3 Desember 2022 shows that company size has a positive effect on company value.
Based on this description, the following hypothesis can be made:
H8: Company size has a positive effect on firm Companies that have good financial performance are the target of investors.
This is because the motivation of investors to invest is to make a profit.
With more and more investors choosing to invest in companies with good performance, the higher the companyAos stock price will be.
The increase in stock prices shows the high value of the company because the value of the company is the multiplication of the stock price and the number of outstanding shares.
The study conducted by Gamayuni .
found that financial performance positively affects firm value.
Based on the explanation above, the researcher proposes the following hypothesis:
H9: Financial Performance has a positive effect on Firm Value.
Research by Kristianti .
found that capital structure has a significant positive effect on financial performance.
In addition, research by Harsono and Pamungkas .
obtained the results that capital structure has a negative effect on firm value.
Based on the description above, it can be proposed the following hypothesis:
H10: Financial Performance can mediate the relationship between Capital Structure and Firm Value.
The value of a company will increase if liquidity also increases.
Companies with good liquidity ratios will attract investors.
Companies that have good liquidity are said to have good performance by investors.
Companies that have a high level of liquidity mean that the company has sufficient internal financing to fulfill their obligations (Yanti and Darmayanti, 2.
In their research.
Yanti and Darmayanti .
found that liquidity has a positive and significant effect on firm value.
line with research from Wardani et al.
, .
which shows that there is a positive and significant relationship between liquidity and financial Therefore, this study proposes the following hypothesis:
H11: Financial Performance can mediate the relationship between Liquidity and Firm Value.
Imronudin et al.
Vol.
7 No.
3 Desember 2022 p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia Sales growth can describe past investment success which can be used as a prediction of future If sales growth increases, the company value will also be higher.
This growth is a benchmark for the companyAos success.
Research by Hidayat .
states that sales growth has a positive and insignificant effect on company value.
According to research conducted by Yuliani .
, the sales growth variable has a significant effect on financial Based on the description above, it can be proposed the following hypothesis:
H12: Financial Performance can mediate the relationship between Sales Growth and Firm Value.
The greater the total assets owned by the company, the greater the size of the company.
Large total assets will increase the capital to be invested and there will be more money circulation activities within the company which can ultimately improve financial performance.
Research conducted by Patricia et al.
, .
shows that the effect of company size on firm value will increase when financial performance increases.
Based on the description above, it can be proposed the following H13: Financial Performance can mediate the relationship between Firm Size and Firm Value.
Figure 1.
Conceptual Framework
RESEARCH METHOD
The population in this study are all manufacturing companies listed on the Indonesian stock exchange.
The sampling method used in this research is non-probability sampling with a purposive sampling technique.
The criteria that must be met to become a sample are as follows:
The entire population of manufacturing companies listed on the IDX for the 2020 .
The company publishes its financial reports in full and clearly on the IDX in 2020.
The company has the completeness of the data used in the research.
dependent variable in this study is a company value.
Firm value is measured using Price to Book Value (PBV).
PBV is the ratio between the stock price and the book value per share.
The PBV formula is as The independent variables are as follows:
Name of variable Measurement Capital Structure Liquidity Data collection is done by the method of The documentation method is used to record and describe the annual financial statements of companies listed on the Indonesia Stock Exchange and w.
A dependent variable is the outcome of a process or a variable that is predicted or explained by other variables (Zikmund et al.
, 2.
The The Effect of Liquidity.
Growth FirmsAo Size Performance Source: Authors p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia The purpose of the multiple linear regression test is to simultaneously identify the effect of the independent factors on the dependent variable and the degree to which the independent variables dominate the dependent variable (Sekaran and Bougie, 2.
To analyze the influence of the independent variables on the dependent variable in the study, a regression was carried out with the following regression equation:
Model 1:
ROE = 0 1DERit 2CRit 3SGit 4UP Ait Model 2:
PBV = 0 1DERit 2CRit 3SGit 4UP 5ROE Ai Where:
PBV: Company Value 0 : Intercepts 1-5: Regression Coefficient DER: Capital Structure CR: Liquidity SG: Sales Growth UP: Company Size ROE: Financial Performance e : error of estimation i: subject to-i .
t: year t .
mount of tim.
To test the indirect effect .
ediation variabl.
as stated in hypotheses 10, 11, 12 and 13, a Sobel test was carried with the following formula:
where a represents the regression coefficient for the relationship between the independent variable and the mediator, b represents the regression coefficient for the relationship between the mediator and the dependent variable.
SEa represents the standard error of the relationship between the independent variable and the mediator, and SEb represents the standard error of the relationship between the mediator variable and the dependent variable.
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RESULT AND DISCUSSION
Regression Analysis Based on table 1, the goodness of fit test shows a sig.
000 < 0.
05 means that there is no misspecification model.
Likewise, the goodness of fit test in model 2 as shown in table 2 also shows a significance value of 0.
006 <0.
meaning that in model 2 there is no misspecification model.
Based on table 1, the value of the adjusted R square in model I is 0.
21, which means that variations in changes in financial performance variables can be explained by the variables of capital structure, liquidity, sales growth, and company size by only 21% and the remaining 79% is explained by other variables.
The adjusted R square value in model II, as shown in table 2 is 0.
75, which means that variations in changes in firm value variables can be explained by the variables of capital structure, liquidity, sales growth, company size, and financial performance by 75% and the remaining 35% is explained by other variables.
Table 1.
Out of Regression Model 1 Variable Coefficient Std.
Error t-Statistic Prob.
LnDER LnCR Growth LnTA R-squared Adjusted R-squared F-statistic Prob(Fstatisti.
Note: The Dependent variable is ROE Source: Authors Table 1 shows that the regression coefficient of capital structure is -5.
787 with a significant value This shows that capital structure has a negative and significant influence on profitability.
So the higher the debt of a company the lower its The lower the profitability is because the fixed burden in the form of debt interest Imronudin et al.
Vol.
7 No.
3 Desember 2022 p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia payments will reduce profits.
This finding is in line with the results of a study conducted by Sheikh and Wang .
and Yuliani .
which stated that capital structure has a negative effect on company The regression coefficient of the liquidity variable is as expected, which is positive but the significance value is greater than 0.
05, namely This shows that liquidity has no significant effect on company performance.
Thus hypothesis 2 which states that liquidity has a positive effect on company performance is not proven.
Although these findings contradict the theory, these findings are in line with the results of a study conducted by Lestari .
which found that liquidity has no effect on firm performance.
The companyAos growth has a positive and significant impact on company performance.
This is shown by the regression coefficient which is positive, namely 0.
202, and a significance value of less than 0.
05, to be precise, 0.
Thus hypothesis 3 which states that growth has a positive and significant effect on company performance is The results of this study are supported by Mardaningsih et al.
, .
who found that growth has a positive effect on company Company size has a positive and significant impact on company performance.
This is indicated by the positive regression coefficient, namely 54,396 with a significance value of 0.
Therefore hypothesis 4 which states that company size has a positive effect on company performance is The bigger the company, the greater the companyAos ability to manage its assets efficiently which will ultimately improve its performance.
However, the results of this study contradict the study conducted by Isbanah .
which found that company size has a negative and significant effect on company performance.
Table 2.
Regression Output of Model 2 Variable Coefficient Std.
Error t-Statistic Prob.
Lnder
Lncr
Growth
LnTA
ROE
R-squared Adjusted R-squared F-statistic Prob(F-statisti.
Note: The Dependent Variable is PBV Source: Authors Table 2 shows that the regression coefficient of capital structure is 42.
250 with a significant value of 0,034.
These indicate that capital structure positively affects firmsAo value.
Therefore, hypothesis 6 stating that Capital structure negatively affects firm value was accepted.
This study is in line with the study conducted by Hirdinis .
, who found that capital structure has a positive effect on firm The higher the proportion of debt to equity, the higher the benefit of the tax shield that enhances the firmAos value.
For liquidity, based on the tests that have been carried out, the significant value is 0.
Therefore, hypothesis 7 stating that liquidity The Effect of Liquidity.
positively affects firmsAo value was rejected.
In other words, the results indicate that liquidity has no significant effect on firm value.
This result does not in line with the study conducted by Jihadi et al.
which reports that liquidity has a positive and significant effect on firmsAo value.
The growth variable has a t-sig value of 0.
237 > 0.
This result indicates that sales growth has no significant effect on firm value.
Therefore hypothesis 8 is rejected.
The results of the variable growth test show a significance value of 0.
237> 0.
This shows that the growth variable has no significant effect on firm value.
Therefore hypothesis 9 which states that growth has a positive effect on firm value is p-ISSN:1411-6510 e-ISSN :2541-6111 JURNAL Riset Akuntansi dan Keuangan Indonesia This is not in line with a study conducted by Fajaria .
which found that growth has a positive and significant effect on firm value.
The coefficient regression value of the firm size variable is 242.
856 with a significant value 229 > 0.
This result indicates that firm size has no significant effect on firm value.
The conclusion of the research is to reject hypothesis This result contradicts the study conducted by Siahaan .
which found that firm size positively affects firmsAo value.
Based on the financial performance testing that has been carried out, the significant value 015 <0.
05, while its regression coefficient These results indicate that financial Vol.
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3 Desember 2022 performance has a positive and significant effect on firm value.
Therefore, hypothesis 10 stating that financial performance positively affects firmsAo value was accepted.
This result was supported by Jihadi et al.
, .
who found that financial performance positively affects firmsAo To test the indirect effect .
ediating variabl.
as stated in hypotheses 10, 11, 12, and 13, a Sobel test was carried out with the formula proposed above.
Instead of calculating manually, the Sobel test is conducted using a Sobel test calculator online at https://w.
com/statcalc/calculator.
aspx?id=31.
In summary, the result of the sobel test value is as follows:
Table 3 Sobel test SEa SEb Sobel Test Statistic (Z) P-value Conclusion LnDEREROEEPBV Rejected LnCREROEEPBV Rejected GrowthEROEEPBV Rejected LnTAEROEEPBV Rejected Mediating Effect Note: a = Regression Coefficient Model 1 .
he regression coefficient for the relationship between the independent variable and the mediato.
b = Regression Coefficient Model 2 .
he regression coefficient for the relationship between the mediator and dependent variabl.
SEa = Standard error Regression Coefficient Model 1.
Seb = Standard error Regression Coefficient Model 2 Source: Authors Table 3 is the result of the Sobel test.
The Sobel test was carried out to test hypotheses 10, 11, 12, and 13 respectively.
Based on the Sobel test statistic and p-value, it can be concluded that financial performance cannot mediate the influence of independent variables .
apital structure, liquidity, growth, and siz.
on a firmAos value.
CONCLUSION
Of the several independent variables analyzed, some variables have a direct influence on financial performance and some others do not.
Capital structure has a negative effect on financial FirmsAo size and growth have a positive and significant effect on financial performance, while liquidity does not have a significant effect on financial performance.
When testing those variables on firmsAo value, this study found that capital structure and financial performance positively affect firmsAo value.
Meanwhile, liquidity, growth, and size have no effect on firm value.
When testing financial performance as a mediating variable, none of the dependent variables affect firm value through financial performance.
Imronudin et al.
Vol.
7 No.
3 Desember 2022
JURNAL Riset Akuntansi dan Keuangan Indonesia
p-ISSN:1411-6510 e-ISSN :2541-6111 REFERENCE