Leverage Analysis, Investment Opportunity Set, and Ownership of Company Value

Abstract

Purpose:  This study examines the effect of leverage, investment opportunity sets, and managerial ownership on firm value with dividend policy as an intervening variable in manufacturing companies listed on the Indonesia Stock Exchange.   Theoretical framework: The general framework of this research includes two theories on it firstly, Signaling Theory which is an action taken by management to guide investors about how management views the company's prospects in the future (Taleb, 2019), and secondly, Dividend Policy Theory is part of the company's spending decisions, primarily related with the company's internal spending, this is because the size of the dividends distributed will affect the size of retained earnings. Retained earnings are one of the company's internal funding sources (Lumapow & Tumiwa, 2017). Methodology:   We use a quantitative approach with a survey approach. The population in this study are all manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2018-2020. In this study, the sample was taken using a purposive sampling method. The purposive sampling method limits the selection of sampling based on specific criteria. Findings:  This study found a positive and significant relationship between leverage and investment opportunity sets on company value in manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. Meanwhile, managerial ownership and dividend policy have a positive and insignificant effect on the company's corporate value in manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. Leverage does not have a significant adverse impact on firm value through dividend policy. Research, Practical & Social implications:   This study analyzes and evaluates the Effect of Leverage on Firm Value. That is, companies that have a high level of leverage can increase firm value because investors assume that the value of companies that have high debt are large-scale companies and the influence of dividend policy on substantial value, namely the use of debt, can increase the firm value if the profits are more significant than costs. Used at the time of use of debt.   Originality/value: The findings show a positive and significant relationship between leverage and investment opportunity sets on company value in manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. Influence does not have a significant adverse effect on firm value through dividend policy. Dividend policy cannot mediate the impact of power on solid value.