Assessing the mediating effect of sustainable growth on the relationship between capital structure, asset turnover, and firm value
DOI:
https://doi.org/10.33021/jaaf.v9i2.6421Keywords:
asset turnover, capital structure, firm value, sustainable growthAbstract
Firm value is a key indicator of corporate performance and has complex and diverse drivers. Previous studies have shown that capital structure and asset turnover play a significant role in shaping firm value, but the underlying mechanisms by which these financial policies influence long-term performance remain unclear. Sustainable growth, which reflects a firm's ability to expand, may be an important pathway connecting these variables. This study aims to examine the effect of capital structure and asset turnover on firm value, with sustainable growth as a mediating variable and firm size and sales growth as control variables. The research focuses on companies listed in the LQ-45 index of the Indonesia Stock Exchange during the 2019–2023 period.The research adopts a quantitative explanatory design using panel data regression. The sample consists of LQ-45 companies consistently listed during the observation period, selected through purposive sampling. Firm value is measured by price-to-book value (PBV), capital structure by debt-to-equity ratio (DER), asset turnover (TATO) as sales-to-assets ratio, and sustainable growth rate (SGR) calculated using the Higgins (1977) formula. Mediation analysis is conducted using Sobel tests.The findings indicate that capital structure does not directly affect firm value, while asset turnover has a positive and significant impact. TATO drives sustainable growth, while DER has an insignificant effect. As a vital mediating mechanism, sustainable growth rate has been shown to increase firm value. SGR is able to negatively mediate the relationship between DER and firm value, and positively mediate the relationship between TATO and firm value. This study contributes to the literature by integrating sustainable growth as a mediating variable in the relationship between financial policy and firm value. The results of this study offer a more nuanced mediation framework for corporate finance theory. The implication for managers is that LQ-45 executives should prioritize asset turnover and SGR optimization over aggressive leverage to drive long-term shareholder value.
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