How Do Profitability, Firm Size, and Growth Affect Firm Value? The Mediating Role of Capital Structure
Keywords:
Capital Structure, Firm Size, Firm Value, Growth, Profitability
Abstract
This study examines the direct effects of profitability, firm size, and firm growth on firm value and the mediating role of capital structure. Using non-financial companies listed on the Indonesia Stock Exchange (IDX) during 2020–2024, this study employs a quantitative approach with two-stage multiple regression analysis. The first model assesses the effects of profitability, firm size, and firm growth on capital structure, measured by the debt-to-equity ratio (DER). In contrast, the second evaluates their effects on firm value, measured by Tobin’s Q, including capital structure. The results show that profitability, firm size, and firm growth significantly and positively affect firm value. Profitability negatively affects capital structure, whereas firm size and firm growth exert positive effects. Capital structure negatively affects firm value. Mediation analysis reveals that capital structure significantly mediates the relationship between profitability and firm value. In contrast, its indirect effects on the relationships between firm size, firm growth, and firm value are insignificant. These findings highlight the contingent role of capital structure in translating firm-specific characteristics into market-based value.
References
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Ahmad, H., Muslim, M., & Syahrah, N. (2022). Several Factors Affecting Firm Value Manufacturing In Indonesia. Jurnal Akuntansi, 26(1), 127-143. Https://Doi.Org/10.24912/Ja.V26i1.821.
Ahmed, A. M., Sharif, N. A., Ali, M. N., & Hágen, I. (2023). Effect Of Firm Size On The Association Between Capital Structure And Profitability. Sustainability, 15(14), 11196. Https://Doi.Org/10.3390/Su151411196.
Akhtar, M., Yusheng, K., Haris, M., Ain, Q. U., & Javaid, H. M. (2022). Impact Of Financial Leverage On Sustainable Growth, Market Performance, And Profitability. Economic Change And Restructuring, 55(2), 737-774. Https://Doi.Org/10.1007/S10644-021-09321-Z.
Amin, M. (2021). The Regression Effect Of Capital Structure And Firm Growth On The Firm Value. Golden Ratio Of Finance Management, 1(1), 33-50. Https://Doi.Org/10.52970/Grfm.V1i1.202.
Anik, S., Chariri, A., & Isgiyarta, J. (2021). The Effect Of Intellectual Capital And Good Corporate Governance On Financial Performance And Corporate Value: A Case Study In Indonesia. The Journal Of Asian Finance, Economics And Business, 8(4), 391-402. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No4.0391.
Arsal, M. (2021). Impact Of Earnings Per Share And Dividend Per Share On Firm Value. Atestasi : Jurnal Ilmiah Akuntansi, 4(1), 11–18. Https://Doi.Org/10.57178/Atestasi.V4i1.158.
Ayaz, M., Mohamed Zabri, S., & Ahmad, K. (2021). An Empirical Investigation On The Impact Of Capital Structure On Firm Performance: Evidence From Malaysia. Managerial Finance, 47(8), 1107-1127. Https://Doi.Org/10.1108/MF-11-2019-0586.
Brigham, E. F., & Houston, J. F. (2025). Fundamentals Of Financial Management (17th Ed.). Cengage Learning.
Chandra, T., Junaedi, A. T., Wijaya, E., & Ng, M. (2022). The Impact Of Co-Structure Of Capital, Profitability And Corporate Growth Opportunities On Stock Exchange In Indonesia. Journal Of Economic And Administrative Sciences, 38(2), 246-269. Https://Doi.Org/10.1108/JEAS-08-2019-0081.
Chowdhury, H., Rahman, S., & Sankaran, H. (2021). Leverage Deviation From The Target Debt Ratio And Leasing. Accounting & Finance, 61(2), 3481-3515. Https://Doi.Org/10.1111/Acfi.12710.
Coles, J. L., & Li, Z. F. (2023). An Empirical Assessment Of Empirical Corporate Finance. Journal Of Financial And Quantitative Analysis, 58(4), 1391–1430. Https://Doi.Org/10.1017/S0022109022000448.
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D'Amato, A., & Falivena, C. (2020). Corporate Social Responsibility And Firm Value: Do Firm Size And Age Matter? Empirical Evidence From European Listed Companies. Corporate Social Responsibility And Environmental Management, 27(2), 909-924. Https://Doi.Org/10.1002/Csr.1855.
Diantimala, Y., Syahnur, S., Mulyany, R., & Faisal, F. (2021). Firm Size Sensitivity On The Correlation Between Financing Choice And Firm Value. Cogent Business &Amp; Management, 8(1). Https://Doi.Org/10.1080/23311975.2021.1926404.
Handayani, N. K. L., & Rahyuda, H. (2024). Pengaruh Struktur Modal, Profitabilitas, Dan Ukuran Perusahaan Terhadap Nilai Perusahaan Dalam Sub-Sektor Food And Beverages [Research Article]. E-Jurnal Manajemen, Universitas Udayana. Https://Doi.Org/10.24843/EJMUNUD.2025.V14.I7.P01.
Hasangapon, M., Iskandar, D., Purnama, E. D., & Tampubolon, L. D. (2021). The Effect Of Firm Size And Total Assets Turnover (Tato) On Firm Value Mediated By Profitability In Wholesale And Retail Sector Companies. Primanomics : Jurnal Ekonomi & Bisnis, 19(3), 49–63. Https://Doi.Org/10.31253/Pe.V19i3.635.
Hermuningsih, S., Kusuma, H., Erawati, T., & Rahmawati, A. D. (2022). Fundamental Aspects Of Leverage, Profitability And Financial Distress As Mediating Variables That Influence Firm Value. Jurnal Akuntansi Dan Auditing Indonesia, 130-144. Https://Doi.Org/10.20885/Jaai.Vol26.Iss2.Art3.
Irawan, D. C., Pulungan, N. A., Subiyanto, B., & Awaludin, D. T. (2022). The Effect Of Capital Structure, Firm Size, And Firm Growth On Profitability And Firm Value. Quality-Access To Success, 23(187). Https://Doi.Org/10.47750/QAS/23.187.06.
Jensen, M. C., & Meckling, W. H. (1976). Theory Of The Firm: Managerial Behavior, Agency Costs And Ownership Structure. Journal Of Financial Economics, 3(4), 305-360.
Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., & Sholichah, F. (2021). The Effect Of Liquidity, Leverage, And Profitability On Firm Value: Empirical Evidence From Indonesia. The Journal Of Asian Finance, Economics And Business, 8(3), 423-431. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No3.0423.
Ma, Y., & Shleifer, A. (2025). The Invention Of Corporate Governance. Journal Of Financial Economics, 104115. Https://Doi.Org/10.1016/J.Jfineco.2025.104115.
Mallinguh, E., Wasike, C., & Zoltan, Z. (2020). The Business Sector, Firm Age, And Performance: The Mediating Role Of Foreign Ownership And Financial Leverage. International Journal Of Financial Studies, 8(4), 79. Https://Doi.Org/10.3390/Ijfs8040079.
Myers, S. C. (1984). The Capital Structure Puzzle. Journal Of Finance, 39(3), 575-592.
Nasution, J., Hasibuan, R. A., Abdi, K., & Rohman, F. (2023). Analisis Pengaruh Implementasi Good Corporate Governance Terhadap Nilai Perusahaan. Jurnal Penelitian Ekonomi Manajemen Dan Bisnis, 2(1), 241-251. Https://Doi.Org/10.55606/Jekombis.V2i1.996.
Novitasari, T., & Sunarto, S. (2021). The Effect Of Capital Structure, Firm Size, Firm Growth, And Profitability On Firm Value (Empire Study On Mining Sector Companies Listed On The Indonesia Stock Exchange 2015-2020). Jasa (Jurnal Akuntansi, Audit Dan Sistem Informasi Akuntansi), 5(3), 512–525. Https://Doi.Org/10.36555/Jasa.V5i3.1738.
Nurwulandari, A. (2021). Effect Of Liquidity, Profitability, Firm Size On Firm Value With Capital Structure As Intervening Variable. Atestasi: Jurnal Ilmiah Akuntansi, 4(2), 257–271. Https://Doi.Org/10.57178/Atestasi.V4i2.271.
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2025). Financial Leverage And Firm Performance: An Empirical Review And Analysis. East African Finance Journal, 4(1), 25-35. Https://Doi.Org/10.59413/Eafj/V4.I1.2.
Reschiwati, R., Syahdina, A., & Handayani, S. (2020). Effect Of Liquidity, Profitability, And Size Of Companies On Firm Value. Utopia Y Praxis Latinoamericana, 25(6), 325-332. Https://Doi.Org/10.5281/Zenodo.3987632.
Spence, M. (1973). Job Market Signaling. The Quarterly Journal Of Economics, 87(3), 355–374
Subagyo, H. (2021). Relationships Between Debt, Growth Opportunities, And Firm Value: Empirical Evidence From The Indonesia Stock Exchange. The Journal Of Asian Finance, Economics And Business (JAFEB), 8(1), 813-821. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No1.813.
Sudiyatno, B., Puspitasari, E., Suwarti, T., & Asyif, M. M. (2020). Determinants Of Firm Value And Profitability: Evidence From Indonesia. The Journal Of Asian Finance, Economics And Business, 7(11), 769-778. Https://Doi.Org/Doi:10.13106/Jafeb.2020.Vol7.No11.769.
Sukma, R. P., Nurtina, A. R., & MH Nainggolan, B. (2022). Effect Of Debt Ratio, Long-Term Debt To Equity, And Firm Size On Profitability. Journal Of Management And Leadership, 5(1), 27–37. Https://Doi.Org/10.47970/Jml.V5i1.302.
Yuliana, S., Fatmala, E., Adiansyah, N. P., Haryadi, D., & Wahyudi, W. (2024). Operating Costs And Profitability To Company Value. International Journal Of Applied Finance And Business Studies, 11(4), 928–934. Https://Doi.Org/10.35335/Ijafibs.V11i4.247.
Abdillah, M. (2024). Analysis Of The Influence Of Financial Performance And Investment On Company Profit Growth. KINERJA: Jurnal Manajemen Organisasi Dan Industri, 3(2), 140–149. Https://Doi.Org/10.37481/Jmoi.V3i2.142.
Ahmad, F. (2025). The Relationship Between Intellectual Capital, Financial Stability, Firm Performance, Market Value, And Bankruptcy Risk: Empirical Evidence From Pakistan. Journal Of The Knowledge Economy, 16(1), 1347-1395. Https://Doi.Org/10.1007/S13132-024-02055-Z
Ahmad, H., Muslim, M., & Syahrah, N. (2022). Several Factors Affecting Firm Value Manufacturing In Indonesia. Jurnal Akuntansi, 26(1), 127-143. Https://Doi.Org/10.24912/Ja.V26i1.821.
Ahmed, A. M., Sharif, N. A., Ali, M. N., & Hágen, I. (2023). Effect Of Firm Size On The Association Between Capital Structure And Profitability. Sustainability, 15(14), 11196. Https://Doi.Org/10.3390/Su151411196.
Akhtar, M., Yusheng, K., Haris, M., Ain, Q. U., & Javaid, H. M. (2022). Impact Of Financial Leverage On Sustainable Growth, Market Performance, And Profitability. Economic Change And Restructuring, 55(2), 737-774. Https://Doi.Org/10.1007/S10644-021-09321-Z.
Amin, M. (2021). The Regression Effect Of Capital Structure And Firm Growth On The Firm Value. Golden Ratio Of Finance Management, 1(1), 33-50. Https://Doi.Org/10.52970/Grfm.V1i1.202.
Anik, S., Chariri, A., & Isgiyarta, J. (2021). The Effect Of Intellectual Capital And Good Corporate Governance On Financial Performance And Corporate Value: A Case Study In Indonesia. The Journal Of Asian Finance, Economics And Business, 8(4), 391-402. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No4.0391.
Arsal, M. (2021). Impact Of Earnings Per Share And Dividend Per Share On Firm Value. Atestasi : Jurnal Ilmiah Akuntansi, 4(1), 11–18. Https://Doi.Org/10.57178/Atestasi.V4i1.158.
Ayaz, M., Mohamed Zabri, S., & Ahmad, K. (2021). An Empirical Investigation On The Impact Of Capital Structure On Firm Performance: Evidence From Malaysia. Managerial Finance, 47(8), 1107-1127. Https://Doi.Org/10.1108/MF-11-2019-0586.
Brigham, E. F., & Houston, J. F. (2025). Fundamentals Of Financial Management (17th Ed.). Cengage Learning.
Chandra, T., Junaedi, A. T., Wijaya, E., & Ng, M. (2022). The Impact Of Co-Structure Of Capital, Profitability And Corporate Growth Opportunities On Stock Exchange In Indonesia. Journal Of Economic And Administrative Sciences, 38(2), 246-269. Https://Doi.Org/10.1108/JEAS-08-2019-0081.
Chowdhury, H., Rahman, S., & Sankaran, H. (2021). Leverage Deviation From The Target Debt Ratio And Leasing. Accounting & Finance, 61(2), 3481-3515. Https://Doi.Org/10.1111/Acfi.12710.
Coles, J. L., & Li, Z. F. (2023). An Empirical Assessment Of Empirical Corporate Finance. Journal Of Financial And Quantitative Analysis, 58(4), 1391–1430. Https://Doi.Org/10.1017/S0022109022000448.
Copeland, T. E., Weston, J. F., & Shastri, K. (2013). Financial Theory And Corporate Policy (Vol. 4). Boston: Pearson Addison Wesley.
Copeland, T. E., Weston, J. F., & Shastri, K. (2013). Financial Theory And Corporate Policy (International Ed.). Pearson College Div.
D'Amato, A., & Falivena, C. (2020). Corporate Social Responsibility And Firm Value: Do Firm Size And Age Matter? Empirical Evidence From European Listed Companies. Corporate Social Responsibility And Environmental Management, 27(2), 909-924. Https://Doi.Org/10.1002/Csr.1855.
Diantimala, Y., Syahnur, S., Mulyany, R., & Faisal, F. (2021). Firm Size Sensitivity On The Correlation Between Financing Choice And Firm Value. Cogent Business &Amp; Management, 8(1). Https://Doi.Org/10.1080/23311975.2021.1926404.
Handayani, N. K. L., & Rahyuda, H. (2024). Pengaruh Struktur Modal, Profitabilitas, Dan Ukuran Perusahaan Terhadap Nilai Perusahaan Dalam Sub-Sektor Food And Beverages [Research Article]. E-Jurnal Manajemen, Universitas Udayana. Https://Doi.Org/10.24843/EJMUNUD.2025.V14.I7.P01.
Hasangapon, M., Iskandar, D., Purnama, E. D., & Tampubolon, L. D. (2021). The Effect Of Firm Size And Total Assets Turnover (Tato) On Firm Value Mediated By Profitability In Wholesale And Retail Sector Companies. Primanomics : Jurnal Ekonomi & Bisnis, 19(3), 49–63. Https://Doi.Org/10.31253/Pe.V19i3.635.
Hermuningsih, S., Kusuma, H., Erawati, T., & Rahmawati, A. D. (2022). Fundamental Aspects Of Leverage, Profitability And Financial Distress As Mediating Variables That Influence Firm Value. Jurnal Akuntansi Dan Auditing Indonesia, 130-144. Https://Doi.Org/10.20885/Jaai.Vol26.Iss2.Art3.
Irawan, D. C., Pulungan, N. A., Subiyanto, B., & Awaludin, D. T. (2022). The Effect Of Capital Structure, Firm Size, And Firm Growth On Profitability And Firm Value. Quality-Access To Success, 23(187). Https://Doi.Org/10.47750/QAS/23.187.06.
Jensen, M. C., & Meckling, W. H. (1976). Theory Of The Firm: Managerial Behavior, Agency Costs And Ownership Structure. Journal Of Financial Economics, 3(4), 305-360.
Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., & Sholichah, F. (2021). The Effect Of Liquidity, Leverage, And Profitability On Firm Value: Empirical Evidence From Indonesia. The Journal Of Asian Finance, Economics And Business, 8(3), 423-431. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No3.0423.
Ma, Y., & Shleifer, A. (2025). The Invention Of Corporate Governance. Journal Of Financial Economics, 104115. Https://Doi.Org/10.1016/J.Jfineco.2025.104115.
Mallinguh, E., Wasike, C., & Zoltan, Z. (2020). The Business Sector, Firm Age, And Performance: The Mediating Role Of Foreign Ownership And Financial Leverage. International Journal Of Financial Studies, 8(4), 79. Https://Doi.Org/10.3390/Ijfs8040079.
Myers, S. C. (1984). The Capital Structure Puzzle. Journal Of Finance, 39(3), 575-592.
Nasution, J., Hasibuan, R. A., Abdi, K., & Rohman, F. (2023). Analisis Pengaruh Implementasi Good Corporate Governance Terhadap Nilai Perusahaan. Jurnal Penelitian Ekonomi Manajemen Dan Bisnis, 2(1), 241-251. Https://Doi.Org/10.55606/Jekombis.V2i1.996.
Novitasari, T., & Sunarto, S. (2021). The Effect Of Capital Structure, Firm Size, Firm Growth, And Profitability On Firm Value (Empire Study On Mining Sector Companies Listed On The Indonesia Stock Exchange 2015-2020). Jasa (Jurnal Akuntansi, Audit Dan Sistem Informasi Akuntansi), 5(3), 512–525. Https://Doi.Org/10.36555/Jasa.V5i3.1738.
Nurwulandari, A. (2021). Effect Of Liquidity, Profitability, Firm Size On Firm Value With Capital Structure As Intervening Variable. Atestasi: Jurnal Ilmiah Akuntansi, 4(2), 257–271. Https://Doi.Org/10.57178/Atestasi.V4i2.271.
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2025). Financial Leverage And Firm Performance: An Empirical Review And Analysis. East African Finance Journal, 4(1), 25-35. Https://Doi.Org/10.59413/Eafj/V4.I1.2.
Reschiwati, R., Syahdina, A., & Handayani, S. (2020). Effect Of Liquidity, Profitability, And Size Of Companies On Firm Value. Utopia Y Praxis Latinoamericana, 25(6), 325-332. Https://Doi.Org/10.5281/Zenodo.3987632.
Spence, M. (1973). Job Market Signaling. The Quarterly Journal Of Economics, 87(3), 355–374
Subagyo, H. (2021). Relationships Between Debt, Growth Opportunities, And Firm Value: Empirical Evidence From The Indonesia Stock Exchange. The Journal Of Asian Finance, Economics And Business (JAFEB), 8(1), 813-821. Https://Doi.Org/10.13106/Jafeb.2021.Vol8.No1.813.
Sudiyatno, B., Puspitasari, E., Suwarti, T., & Asyif, M. M. (2020). Determinants Of Firm Value And Profitability: Evidence From Indonesia. The Journal Of Asian Finance, Economics And Business, 7(11), 769-778. Https://Doi.Org/Doi:10.13106/Jafeb.2020.Vol7.No11.769.
Sukma, R. P., Nurtina, A. R., & MH Nainggolan, B. (2022). Effect Of Debt Ratio, Long-Term Debt To Equity, And Firm Size On Profitability. Journal Of Management And Leadership, 5(1), 27–37. Https://Doi.Org/10.47970/Jml.V5i1.302.
Yuliana, S., Fatmala, E., Adiansyah, N. P., Haryadi, D., & Wahyudi, W. (2024). Operating Costs And Profitability To Company Value. International Journal Of Applied Finance And Business Studies, 11(4), 928–934. Https://Doi.Org/10.35335/Ijafibs.V11i4.247.
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