The Effect of Funding Policy And Macroeconomics on Economic Value-Added Creation In Infrastructure State-Owned Enterprises
Keywords:
capital structure, DER, EVA, macroeconomic, National Strategic Projects
Abstract
Determining the optimal capital structure for a company is crucial as it impacts its value. Additionally, macroeconomic conditions such as Inflation and interest rates can affect a company's value. This study aims to establish a correlation between capital structure, measured by the Debt to Equity (DER) ratio, macroeconomic factors, reflected in Inflation and interest rates, and the creation of economic value added (EVA) and company profitability, measured by the ratio of return on invested capital (ROIC). A panel data regression methodology was used to conduct this research, and a sample of infrastructure state-owned enterprises that carried out National Strategic Projects (PSN) between 2011 and 2021 was taken. The results showed that DER had a negative and significant impact on EVA and ROIC, while Inflation did not affect ROIC and EVA. Additionally, the interest rate had a positive and significant impact on ROIC but not on EVA.
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References
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Andreadakis, S. (2012). Enlightened Shareholder Value: Is It the New Modus Operandi for Modern Companies? Corporate Governance: Recent Developments and New Trends, 415–432.
Calomiris, C. W., & Herring, R. J. (2013). How to design a contingent convertible debt requirement that helps solve our tooâ€bigâ€toâ€fail problem. Journal of Applied Corporate Finance, 25(2), 39–62.
Câmara, R. M., Caby, J., & Salvador, P. I. C. A. (2022). The effects of capital structure on profitability in the Brazilian electricity sector. International Journal of Governance and Financial Intermediation, 1(3), 203–218.
Chan, T.-K., & Pribadi, K. S. (2022). Financing of Infrastructure Investments. In Construction in Indonesia (pp. 92–108). Routledge.
Chen, D.-H., Chen, C.-D., Chen, J., & Huang, Y.-F. (2013). Panel data analyses of the pecking order theory and the market timing theory of capital structure in Taiwan. International Review of Economics & Finance, 27, 1–13.
Detthamrong, U., Chancharat, N., & Vithessonthi, C. (2017). Corporate governance, capital structure and firm performance: Evidence from Thailand. Research in International Business and Finance, 42, 689–709.
Fan, L. W., Pan, S. J., Liu, G. Q., & Zhou, P. (2017). Does energy efficiency affect financial performance? Evidence from Chinese energy-intensive firms. Journal of Cleaner Production, 151, 53–59.
Farhan, K. Z., Johari, M. A. M., & DemirboÄŸa, R. (2020). Assessment of important parameters involved in the synthesis of geopolymer composites: A review. Construction and Building Materials, 264, 120276.
Faroh, A., & Shen, H. (2015). Impact of interest rates on foreign direct investment: Case study Sierra Leone economy. International Journal of Business Management and Economic Research, 6(1), 124–132.
Gebru, A. A., Birhanu, T., Wendimu, E., Ayalew, A. F., Mulat, S., Abasimel, H. Z., Kazemi, A., Tadesse, B. A., Gebru, B. A., Deriba, B. S., Zeleke, N. S., Girma, A. G., Munkhbat, B., Yusuf, Q. K., Luke, A. O., & Hailu, D. (2021). Global burden of COVID-19: Situational analyis and review. Human Antibodies, 29(2), 139–148. https://doi.org/10.3233/HAB-200420
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Khan, I., Zakari, A., Dagar, V., & Singh, S. (2022). World energy trilemma and transformative energy developments as determinants of economic growth amid environmental sustainability. Energy Economics, 108, 105884.
Kimathi, M. H., Galo, M. N., & Melissa, A. G. (2015). Effect of leverage on performance of non-financial firms listed at the nairobi securities exchange. Journal of Finance and Accounting, 3(5), 132–139.
Le, T. P. V., & Phan, T. B. N. (2017). Capital structure and firm performance: Empirical evidence from a small transition country. Research in International Business and Finance, 42, 710–726.
Mbonu, C. M., & Amahalu, N. N. (2021). Effect of firm characteristics on capital structure of insurance companies listed on Nigeria stock exchange. International Journal of Management Studies and Social Science Research, 3(5), 217–228.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297.
Nasimi, R. N. (2016). Determinants of capital structure (an empirical evidence, US). Global Journal of Management and Business Research, 16(4), 29–42.
Odalo, S. K., Achoki, G., & Njuguna, A. (2016). Influence of Liquidity on the Financial Performance of Agricultural Firms Listed at the Nairobi Securities Exchange. American Journal of Finance, 1(3), 35–53.
Oleka, E. U., Khanal, A., Osareh, A. R., & Lebby, G. L. (2015). Exploring the challenging issues with synchrophasor technology deployments in electric power grids. International Journal of Energy and Power Engineering, 9(9), 1085–1088.
Phan, A. V., Le Nguyen, M., & Bui, L. T. (2017). Convolutional neural networks over control flow graphs for software defect prediction. 2017 IEEE 29th International Conference on Tools with Artificial Intelligence (ICTAI), 45–52.
Praditasari, J. A., & Sumarmik, S. (2018). Asupan Lemak, Aktivitas Fisik Dan Kegemukan Pada Remaja Putri di Smp Bina Insani Surabaya. Media Gizi Indonesia, 13(2), 117–122.
Ricca, L. T., Jucá, M. N., & Junior, E. H. (2021). Tax benefit and bankruptcy cost of debt. The Quarterly Review of Economics and Finance, 81, 82–92.
Şamiloğlu-Riegermann, P. (2014). Türkisches und deutsches Vertragshändlerrecht im Rechtsvergleich. (No Title).
Shahveisi, F., Navid, B. J., Najafi, Y., & Hosseini, S. A. A. (2012). The Study of the Relationship between the Capital Structure and the Variables of the Value-based Performance Assessment. Research Journal of Finance and Accounting, 3(7), 131–139.
Shahveisi, K., Abdoli, N., Farnia, V., Khazaie, H., Hosseini, M., Ghazvini, H., & Khodamoradi, M. (2022). REM sleep deprivation before extinction or reinstatement alters methamphetamine reward memory via D1-like dopamine receptors. Pharmacology Biochemistry and Behavior, 213, 173319.
Singh, N. P., & Bagga, M. (2019). The effect of capital structure on profitability: An empirical panel data study. Jindal Journal of Business Research, 8(1), 65–77.
Team, C. F. I. (2022). Capacity Utilization. Corporate Finance Institute, 29.
Published
2022-11-20
Section
Original Articles
Copyright (c) 2022 Ratu Chumairoh
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