Investment Decisions, Funding Decisions, Dividend, and Firm Value (Study of Companies Listed on the Indonesia Stock Exchange)

Abstract

This study aims to examine whether decisions made by managers will have an impact on the firm value. This is based on the ability of managers to reduce information asymmetry through reports provided to stakeholders. The independent variables used in this study are investment decisions, funding decisions, and dividends, while the dependent variable in this study is the value of the company. This study uses a sample of manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2006-2016. The sample used must show that the company pays dividends for eleven consecutive years. Investment decisions are measured using market value to book ratio (MVA), funding decisions are measured using debt to equity ratio (DER), dividends are measured using dividend payout ratio (DPR) and company value is measured using price to book value (PBV). The results show that funding decisions have a positive and significant effect on firm value. This shows that stakeholders tend to see how the company allocates funds that have been processed, investors tend to prefer using internal funds in their funding decisions rather than external funding, and the right funding decisions will have an impact on the sustainability of the company. Dividends have a significant negative effect on firm value. This shows that stakeholders tend to disagree if the company pays dividends every year, because it will reduce the company's retained earnings to carry out the company's operations; they do not want the company's operations to be disrupted due to limited funding. Meanwhile, investment decisions have a negative and not significant effect on firm value. Keywords—Investment Decisions, Funding Decisions, Dividend, Firm Value.