THE EFFECT OF CAPITAL STRUCTURE, COMPANY GROWTH, AND INFLATION ON FIRM VALUE WITH PROFITABILITY AS INTERVENING VARIABLE (STUDY ON MANUFACTURING COMPANIES LISTED ON BEI PERIOD 2014-2018)

DOI: 10.38035/DIJEFA Abstract: The purpose of this research is to test and analyze the effect of capital structure, company growth, and inflation on firm value with profitability as intervening variable. The population in this research is manufacturing companies listed on the Indonesia Stock Exchange in 2014 2018 totaling 174 companies. Determination of the sample is selected by purposive sampling. Out of 174 populations, only 27 samples were selected. The type of research data is panel data. Path analysis was chosen as the method of data analysis. The results shows that partially capital structure has a significant effect on firm value, company growth and inflation have no significant effect on firm value, capital structure has a significant effect on profitability, company growth and inflation have no significant effect on profitability, profitability has a significant effect on firm value. Profitability mediates the effect of capital structure on firm value, profitability does not mediate the effect of company growth and inflation on firm value.


INTRODUCTION
A company's main goal is to maximize the company's wealth or value. Reflections on company performance can be known from the firm value. PBV (Price to Book Value) is one of the proxy for calculating firm value. The high PBV ratio indicates the company's good performance, usually a good PBV is > 1 which means the market value of the stock > book value. PBV of manufacturing companies that were sampled in this study during 2014-2018 period moved fluctuatively. The highest average PBV is in 2017 = 6.19, and the lowest is in 2018 = 4.40. This fluctuating PBV movement can be caused by fluctuating DER and PTA

RESEARCH METHODS Types of research
Associative research with the form of causal relations with the aim to determine the relationship between 2 variables / more. This type of research is quantitative research.

Data Source
Data sources used are secondary data: DER, PTA, PBV, ROE which sources are from Annual Report Manufacturing Companies listed on the IDX, and for Inflation data (CPI) sourced from the Bank Indonesia website during 2014-2018.

Data Type
Data type: panel data. The analysis will be conducted with a time span of 5 years from 2014 to 2018. Taking this time span is a time span by assuming that the data taken is data with the last condition.

Data Analysis Method
Using SPSS Version 22.

Path Analysis
Path analysis is used to analyze the pattern of relationships between variables with the aim of knowing the direct and indirect effects of a set of independent variables on the dependent variable.

Hypothesis test T test (partial)
T test explains how far the influence of one independent variable individually in explaining the variation of the dependent variable. The significance level used was 0.05 (α = 5%) (Ghozali, 2011). The hypothesis is rejected or accepted with the provisions: 1. If the significance value of t > 0.05 means that H 0 is accepted; H 1 is rejected (regression coefficient is not significant). This means that partially the independent variable has no significant effect on the dependent variable. 2. If the significance value of t ≤ 0.05 means that H 0 is rejected; H 1 is accepted (regression coefficient is significant). This means that partially the independent variable has a significant effect on the dependent variable.

Uji Sobel
This study uses a mediating / intervening variable: profitability. The Sobel Test is used to test the mediation hypothesis, how it works by testing the strength of the indirect effect X 1 , X 2 , X 3 on Y through mediation M. The calculation is done by multiplying the path: Standard error a = Sa; Standard error b = Sb; Standard error c = Sc; Standard error d = Sd; Standard error e = Se; Standard error f = Sf. Standard error indirect effect ab = Sat; cd = Scd, ef = Sef. The formula is: Sab = √b 2 Sa 2 + a 2 Sb 2 + Sa 2 Sb 2 Scd = √d 2 Sc 2 + c 2 Sd 2 + Sc 2 Sd 2 Sef = √f 2 Se 2 + e 2 Sf 2 + Se 2 Sf 2 t value for the coefficients ab, cd and ef, the formula is:

Determination Coefficient Analysis (R 2 )
Adjusted R 2 is used for the determination test in this research. The interpretation of the results is as follows: 1. If the value of Adjusted R 2 is getting closer to 1 it means that the effect of the independent variables gives almost all the information needed in estimating the variation of the dependent variable. 2. If the value of Adjusted R 2 is getting closer to 0 it means that the smaller contribution made by the independent variables on the dependent variable.  The coefficient of determination (Adjusted R 2 ) = 0.120 or 12%. This means that the profitability variable can be explained by the variables of capital structure, company growth, and inflation by 12%, and the remaining 88% is explained by other factors outside the model.

Table 4.6 Adjusted R 2 Equation 2
The coefficient of determination (Adjusted R 2 ) = 0.902 or 90.2%. This means that the firm value variable can be explained by the variables of capital structure, company growth, inflation, and profitability by 90.2%, and the remaining 9.8% is explained by other factors outside the model.

Discussions The Effect of Capital Structure on Firm Value
According to the t test the firm value (PBV) is significantly and positively influenced by the capital structure (DER), the significance value is 0.003. Appropriate capital structure composition (DER) and used optimally can bring positive value to the firm value. The positive direction here means that the more precise and optimal composition of the company's capital structure (DER), the greater the company's value (PBV) that can be achieved.
These results are in line with research by Andrian (2012) who concluded the same thing. In the traditional approach theory, optimal capital structure greatly affects the firm value.

The Effect of Company Growth on Firm Value
According to the t test the firm value (PBV) was not significantly affected by the company's growth (PTA). The direction of the negative relationship in these two variables means that the increase in company growth is not in line with the increase in the firm value, the high growth of the company causing the funds needed are also high. Management of a growing company requires large funds for its operations. The company funds are more focused on supporting the company's growth than the welfare of its shareholders. Therefore, investor more confidence towards established companies than growing companies. That's why even though the company's growth is high, it does not significantly affect to the firm value. This research results are in line with research Safrida (2008).

The Effect of Inflation on FirmValue
According to the t test the firm value (PBV) is not significantly affected by inflation (CPI). During the research period (2014-2018) inflation that occurred in Indonesia was included in the category of mild inflation because its value < 10% per year. This mild inflation does not really affect the firm value, because investors focus on the company's idea to keep making profits amid the inflation that hit. Investors believe the company has a strategy and solution to deal with inflation in Indonesia so that it does not affect the firm value, for example, do the efficiency program or cutting unnecessary costs. The results of this research confirm the results of Hamidah's research (2015).

The Effect of Capital Structure on Profitability
According to the t test profitability (ROE) is significantly and positively influenced by the capital structure (DER). This means that any debt that increases in the company can lead to increased profitability of the company provided the debt is used appropriately. According to Trade off Theory, the use of debt can lead to a reduction in taxes, agency costs that make the company's profitability increase. In the capital structure, the benefits and costs arising from debt must be balanced, additional debt is allowed as long as the benefits > interest expense. If the opposite occurs (interest expense > benefits) additional debt is no longer allowed. The results of this research confirm Andrian's research (2012).

The Effect of Company Growth on Profitability
According to the t test profitability (ROE) is not significantly affected by company growth (PTA). Large funds are needed by companies that are in the growth stage. Companies usually hold most of their income because of the large funding requirements. Benchmarks for the success of a company is the growth of the company, and can also be used as an investment reference for future growth. One of the characteristics of a company's growth is the increase in assets which is a sign that the company is expanding. However, the decision to expand must also be considered, if the expansion failed then it impacts on the cost of the company that will increase, which also impacts in a decrease in the company's profitability. The results of this research confirm the results of Andrian's research (2012).

The Effect of Inflation on Profitability
According to the t test the profitability (ROE) is not significantly affected by inflation (CPI). This means that if inflation rises it does not always cause the decrease of company's profitability. During the research period (2014)(2015)(2016)(2017)(2018) inflation that occurred in Indonesia was included in the category of mild inflation, its value < 10% per year. This inflation has no significant effect on company profitability because investors believe the company has strategies and solutions to deal with mild inflation in Indonesia. The strategy, such as efficiency or cutting unnecessary costs. The results of this research confirm the research of Adyatmika (2017).

The Effect of Profitability on FirmValue
According to the t test the firm value (PBV) is significantly and positively influenced by profitability (ROE). This means that the increase in company profitability is in line with the increase in the firm value. This research results are in line with research of Andrian (2012). The high profitability indicates the company's good prospects going forward. That's why investors interested for investing in the company, the high of investor interest causes an increase in demand for company shares. If the demand for shares increases, the firm value also increases.

The Effect of Capital Structure on Firm Value with Profitability as intervening variable
Capital Structure and Firm Value its effect is mediated by profitability. This means that the benefits derived from debt > interest expenses must be paid because of the use of debt. In this case, the company chooses the right combination of capital structure and also used optimally, so that increasing debt can increasing the company's net profit, which means the value of ROE will increase too. The high ROE is used as a special attraction for investors, because ROE is the ratio of returns from funds invested by shareholders. Investor interest has triggered an increase in demand of stock. High stock demand causes a rise in stock prices, so the firm value also rises.

The Effect of Company Growth on Firm Value with Profitability as intervening variable
Company Growth and Firm Value its effect is not mediated by profitability. The company's growth is marked by an increase in total assets. Expansion is a factor that can increase total assets. But the failure of expansion can cause the increasing of company's expense, that impacts in decreasing of the company's profitability. This information is important for investors to make decisions in investing their capital. Because companies that are growing just need a lot of funds for operations. The company funds are more focused on supporting the company's growth than the welfare of its shareholders. Investors usually more confidence towards established companies than growing companies. That's why eventhough the company's growth is high, it does not significantly affect to the firm value, because the profitability obtained is used for company development.

The Effect of Inflation on Firm Value with Profitability as intervening variable
Inflation and firm value are not mediated by profitability. It means, increasing inflation does not always decreasing company value and profitability. During the research period (2014)(2015)(2016)(2017)(2018) inflation that occurred in Indonesia was included in the category of mild inflation, because the value was < 10% per year. This mild inflation does not really affect the firm value because investors believe the company has a strategy to increasing profitability in the midst of inflation.
That strategies, such as by efficiency or cutting costs that are not necessary. With these strategies, we expected that the company's profitability will increase and also followed by an increase of the firm value.