Investigate other factors that may affect capital structure and company value

Oct 13, 2025 by talynt.org 77 views

Analysis of Determinants of Capital Structure and Its Effects on Company Value: Case Study in Manufacturing Companies in Southeast Asia (2013-2015)

Introduction

In today's competitive business landscape, companies are constantly seeking ways to increase their value and attract investors. One crucial factor that contributes to a company's value is its capital structure, which includes various determinants such as profitability ratios, asset tangibility, growth rates, company size, and non-debt tax shield. This study aims to analyze the effect of these determinants on company value, considering the capital structure as an intervening variable in manufacturing companies in Southeast Asia between 2013 and 2015.

The Importance of Capital Structure in Company Value

Capital structure refers to the mix of debt and equity used by a company to finance its operations and growth. A well-managed capital structure can have a significant impact on a company's value, as it affects its ability to raise capital, manage risk, and make strategic investments. In this study, we examine the determinants of capital structure and their effects on company value in manufacturing companies in Southeast Asia.

Research Methodology

This research is descriptive and explanatory, using data obtained through documentation studies. The population analyzed included 211 manufacturing companies listed on the Stock Exchange in five Southeast Asian countries: Indonesia, Malaysia, Singapore, Thailand, and the Philippines. Sampling is done using a saturated sampling method, where the entire population is used as a sample. Data analysis is carried out by the path analysis method using EViews 7.0 software.

Research Results

First Substructure: Determinants of Capital Structure

The results of the first analysis show that simultaneously, the determinant of the capital structure, which includes profitability, asset tangibility, growth rate, company size, and non-debt tax shield, has a negative and significant influence on the capital structure of manufacturing companies in Southeast Asia, with a coefficient of determination (R²) of 86.32%. Specifically, the profitability ratio has a negative effect on the capital structure, while the company's size shows a significant positive effect.

Second Substructure: Effects of Capital Structure on Company Value

In the second analysis, it was found that simultaneously, all of these factors, coupled with capital structure, had a positive and significant influence on the company's value with the coefficient of determination (R²) of 88.22%. Partially, factors such as tangibility assets, growth rates, and company sizes are proven to have a significant positive influence on the company's value.

Additional Analysis and Explanation

The results showed that there was a complex relationship between capital structure and company value. While a larger capital structure is generally seen as a sign of good financial health, the negative influence of profitability on the capital structure indicates that companies may prefer to finance their growth through internal funds rather than debt. This could be due to company concerns about financial risk and inefficient debt management.

On the other hand, larger companies tend to bring more assets and capital, which allows companies to have better access to financial resources. This increases the chances of the company to make investments that can increase company value.

Although the capital structure does not function as an intervening variable that connects all of these determinants with company value, these results provide instructions that each factor has a direct contribution to the company's value. By understanding this relationship, companies can take better strategic steps to maximize their values in the eyes of investors.

Conclusion

From the analysis that has been carried out, it can be concluded that manufacturing companies in Southeast Asia must consider various determinants of capital structure in their financial strategies to increase company value. Profitability, tangibility assets, growth rates, and company size have an important role in determining the value of the company, even though the capital structure does not function as a bridge between the determinant and the company's final value. Further research is needed to explore other factors that may affect and to examine the impact of changing market dynamics.

Recommendations for Future Research

Based on the findings of this study, several recommendations for future research can be made:

Investigate other factors that may affect capital structure and company value: This study has identified several determinants of capital structure and their effects on company value. However, there may be other factors that are not considered in this study that could also have an impact on capital structure and company value.
Examine the impact of changing market dynamics: The study was conducted between 2013 and 2015, and the market dynamics may have changed since then. Future research should examine the impact of changing market dynamics on capital structure and company value.
Investigate the role of non-debt tax shield in capital structure: Non-debt tax shield was found to have a significant positive effect on capital structure in this study. Future research should investigate the role of non-debt tax shield in capital structure and its effects on company value.

Limitations of the Study

This study has several limitations that should be noted:

Sample size: The sample size of 211 manufacturing companies may not be representative of all manufacturing companies in Southeast Asia.
Data limitations: The data used in this study may not be comprehensive or up-to-date, which could affect the accuracy of the findings.
Methodological limitations: The path analysis method used in this study may not be the most appropriate method for analyzing the relationships between capital structure and company value.

Future Directions for Research

Based on the findings of this study, several future directions for research can be identified:

Investigate the impact of capital structure on company performance: This study has identified the determinants of capital structure and their effects on company value. Future research should investigate the impact of capital structure on company performance.
Examine the role of capital structure in mergers and acquisitions: Capital structure may play a crucial role in mergers and acquisitions. Future research should examine the role of capital structure in mergers and acquisitions.
Investigate the impact of capital structure on company risk: Capital structure may affect company risk. Future research should investigate the impact of capital structure on company risk.

Conclusion

In conclusion, this study has identified the determinants of capital structure and their effects on company value in manufacturing companies in Southeast Asia. The findings of this study have several implications for companies and investors. Companies should consider various determinants of capital structure in their financial strategies to increase company value. Investors should also consider the capital structure of companies when making investment decisions. Further research is needed to explore other factors that may affect and to examine the impact of changing market dynamics.
Frequently Asked Questions (FAQs) on Capital Structure and Company Value

Introduction

In our previous article, we discussed the analysis of determinants of capital structure and its effects on company value in manufacturing companies in Southeast Asia between 2013 and 2015. In this article, we will address some of the frequently asked questions (FAQs) related to capital structure and company value.

Q1: What is capital structure, and why is it important for companies?

A1: Capital structure refers to the mix of debt and equity used by a company to finance its operations and growth. It is an important aspect of a company's financial strategy, as it affects its ability to raise capital, manage risk, and make strategic investments.

Q2: What are the determinants of capital structure?

A2: The determinants of capital structure include profitability ratios, asset tangibility, growth rates, company size, and non-debt tax shield. These factors can influence a company's capital structure and, in turn, affect its value.

Q3: How does capital structure affect company value?

A3: Capital structure can have a significant impact on company value. A well-managed capital structure can increase a company's value by providing access to capital, managing risk, and making strategic investments. Conversely, a poorly managed capital structure can decrease a company's value by increasing financial risk and reducing access to capital.

Q4: What is the relationship between profitability and capital structure?

A4: The relationship between profitability and capital structure is complex. While a higher profitability ratio may indicate a company's ability to generate cash and reduce debt, it may also lead to a higher capital structure, which can increase financial risk.

Q5: How does company size affect capital structure?

A5: Company size can have a significant impact on capital structure. Larger companies tend to have more assets and capital, which can provide better access to financial resources and reduce financial risk.

Q6: What is the role of non-debt tax shield in capital structure?

A6: Non-debt tax shield refers to the tax benefits of debt financing, such as interest deductions. It can have a significant impact on capital structure, as it can reduce a company's tax liability and increase its ability to raise capital.

Q7: How can companies manage their capital structure to increase company value?

A7: Companies can manage their capital structure by considering various factors, including profitability ratios, asset tangibility, growth rates, company size, and non-debt tax shield. They can also use financial instruments, such as debt and equity, to optimize their capital structure and increase company value.

Q8: What are the implications of this study for investors?

A8: The findings of this study have several implications for investors. Investors should consider the capital structure of companies when making investment decisions, as it can affect a company's ability to raise capital, manage risk, and make strategic investments.

Q9: What are the limitations of this study?

A9: This study has several limitations, including a sample size of 211 manufacturing companies, which may not be representative of all manufacturing companies in Southeast Asia. Additionally, the data used in this study may not be comprehensive or up-to-date, which could affect the accuracy of the findings.

Q10: What are the future directions for research?

A10: Based on the findings of this study, several future directions for research can be identified, including investigating the impact of capital structure on company performance, examining the role of capital structure in mergers and acquisitions, and investigating the impact of capital structure on company risk.

Conclusion

In conclusion, this article has addressed some of the frequently asked questions (FAQs) related to capital structure and company value. The findings of this study have several implications for companies and investors, and further research is needed to explore other factors that may affect and to examine the impact of changing market dynamics.