Institutional Ownership, Profitability, and Exchange Rate as Determinants of Firm Value with Capital Structure as an Intervening Variable

Waluyo Jati

doi:10.59890/ijfbm.v4i1.182

Authors

Waluyo Jati Universitas Pamulang

DOI:

https://doi.org/10.59890/ijfbm.v4i1.182

Keywords:

Firm Value, Capital Structure, Profitability, Institutional Ownership, Exchange Rate

Abstract

This study investigates the determinants of firm value in Indonesian publicly listed construction companies by examining the effects of profitability, institutional ownership, and exchange rate fluctuations, with capital structure as a mediating variable. The sample covers construction firms listed on the Indonesia Stock Exchange from 2007 to 2024. Panel data regression, Structural Equation Modeling–Partial Least Squares (SEM-PLS), and Interpretive Structural Modeling (ISM) are employed to ensure robustness. The results show that profitability positively affects capital structure, while institutional ownership and exchange rate depreciation negatively affect capital structure. Profitability and institutional ownership positively influence firm value, whereas exchange rate depreciation and capital structure negatively affect firm value. Capital structure significantly mediates the relationships between profitability, institutional ownership, exchange rate, and firm value. These findings support Signaling, Agency, Trade-Off, and Hedging theories and highlight the strategic role of capital structure in transmitting internal performance and external macroeconomic conditions to firm value. The study provides practical implications for managers, investors, and policymakers in emerging markets.

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