The Effect of Capital Structure to the Firm’s Profitability and The Value of the Firm: A Study in Property and Real Estate Sector Listed in Indonesian Stock Exchange By Nisrina Afiah 19014160 Undergraduate Program School of Business and Management Institut Teknologi Bandung i THE EFFECT OF CAPITAL STRUCTURE TO THE FIRM’S PROFITABILITY AND THE VALUE OF THE FIRM: A STUDY IN PROPERTY AND REAL ESTATE SECTOR LISTED IN INDONESIAN STOCK EXCHANGE Nisrina Afiah NIM: 19014160 Final Examination: 11 July 2017 Supervisor: Dr. Subiakto Soekarno, MBA, CFP Bachelor of Management Program School of Business and Management Institut Teknologi Bandung ABSTRACT It is very important to a firm finding the proper capital structure decision since it will affect the firm’s ability to finance its activities. The capital structure itself is defined as the mix of debt (short- term debt and long-term debt), equity (preferred stock and common stock), and also hybrid securities that a firm used to finance its assets. To keep the business alive, the firm needs to increase its profitability that will make the firm sustain. Therefore, this is one of reason why firms need to decide their source of financing properly. As the Modigliani and Miller Theory (1958) stated that the capital structure is irrelevant with the value of the firm under few circumstances such as no bankruptcy cost, no agency cost, no taxes, no asymmetric information, and in efficient market. However, until now, the capital structure impact toward profitability and value of firm still being debated. In this study, the property and real estate sector will be the objective of the research since this sector is one of important sector and has contributed on the economy of Indonesia. As the matter of fact, population of Indonesian people is keep growing and the demand of living place is also increasing. This is one of the reason why investors also think that property and real estate sector as interesting investment. The purpose of the research reveals the impact of capital structure of a firm to its profitability that consists of several indicators such as GPM (Gross Profit Margin), OPM (Operating Profit Margin), ROA (Return on Asset), ROE (Return on Equity) and capital structure effect to the value of firms with independent variable, Debt Ratio. This study also includes the control variables such as firm’s size and sales growth. The value of firm is determined by multiplying the number of shares outstanding with share price. Regard to the value of firm, the firm goal is not only to earn profit but also to maximize the shareholder’s wealth. As shareholders has decided to invest to the firm, they expect for return in future. For investors, to decide whether they want to invest or not, they need to make sure that the firm where they invest will give them return and will be sustained. Therefore, value of firm is one of consideration for investors. In this study, the author examines the impact of the effect of capital structure to profitability and the value of the firm. There are 29 out of 45 property and real estate firms that listed in Indonesian Stock Exchange that observed by author in this study. To make this study more significant than previous studies, the author uses the data for 8 years from 2009 until 2016. The methodology that used in this study is panel data regression analysis. The result of this study is debt ratio has negative impact to ROA and Value of firm. So, this study recommends the property and real estate business to concern of their debt level since it increases the investor’s doubt when they want to invest and suggest that they should use their retained earnings when funding is necessary. Keywords: Debt ratio, Capital Structure, GPM, OPM, ROA, ROE, Value of the Firm, Panel Data Regression Analysis ii PENGARUH STRUKTUR MODAL TERHADAP PROFITABILITAS PERUSAHAAN DAN NILAI PERUSAHAAN: STUDI DI SEKTOR PROPERTI DAN REAL ESTATE TERDAFTAR DI BURSA EFEK INDONESIA Nisrina Afiah NIM: 19014160 Tanggal sidang: 11 Juli 2017 Dosen Pembimbing: Dr. Subiakto Soekarno, MBA, CFP Sarjana Manajemen Sekolah Bisnis dan Manajemen Institut Teknologi Bandung ABSTRAKSI Sangat penting bagi suatu perusahaan untuk menemukan struktur modal yang sesuai karena itu akan mempengaruhi tingkat profitabilitas dan kemampuannya untuk. Sruktur modal sendiri memiliki definisi sebagai kombinasi antara hutang (hutang jangka panjang dan hutang jangka pendek), ekuitas, dan sekuritas yang digunakan perusahaan untuk membiayai asetnya. Untuk menghasilkan keuntungan, tentunya perusahaan juga butuh mengeluarkan biaya. Untuk itu, ini menjadi salah satu alasan perusahaan dalam memutuskan sumber keuangannya dengan baik. Seperti teori Modigliani dan Miller (1958) mengatakan bahwa struktur modal tidak berpengaruh terhadap nilai perusahaan dengan beberapa asumsi seperti tidak adanya biaya kebangkrutan, tidak adanya cost agency, tidak adanya pajak, informasi yang sama, dan keadaan pasar yang efisien. Walaupun begitu, pengaruh struktur modal dengan tingkat profitabilitas perusahaan dan nilai perusahan masih diperdebatkan. Di dalam studi ini, sektor properti dan real estate yang akan diteliti karena sektor ini merupakan sektor yang penting dan sudah berkontribusi besar dalam perekonomian Indonesia. Dengan populasi orang Indonesia yang semakin meningkat, permintaan akan tempat tinggal juga semakin tinggi. Ini juga yang menjadi salah satu alasan investor menganggap properti dan real estate merupakan investasi yang menarik. Studi ini bertujuan untuk menemukan pengaruh struktur modal perusahaan terhadap profitabilitasnya yang terdiri atas beberapa indikator seperti GPM (Gross Profit Margin), OPM (Operating Profit Margin), ROA (Return on Assets), ROE (Return on Equity) dan efek struktur modal terhadap nilai perusahaan dengan variabel bebas, debt ratio. Studi ini juga memasukan variabel kontrol seperti ukuran perusahaan dan pertumbuhan penjualan. Nilai perusahaan didapatkan dengan mengalikan jumlah saham beredar dan harga saham. Terkait dengan nilai perusahaan, tujuan dari perusahaan tidak hanya menghasilkan keuntungan, tetapi juga untuk mensejahterakan pemegang saham. Para pemegang saham tentu mengharapkan keuntungan di masa depan. Untuk memutuskan apakah mereka ingin berinvestasi atau tidak, mereka tentunya harus memastikan perusahaan tempat mereka berinvestasi akan berhasil menghasilkan keuntungan atau tidak dan nilai peruasahaan menjadi salah satu pertimbangan. Dalam studi ini, penulis memeriksa pengaruh antara struktur modal dengan profitabilitas dan nilai perusahaan. Terdapat 29 dari 45 perusahaan properti dan real estate yang terdaftar di Bursa Efek Indonesia. Agar studi ini menjadi lebih signifikan dibandingkan studi-studi yang sebelumnya, penulis menggunakan 8 tahun, sejak tahun 2009 sampai dengan 2016. Metode yang digunakan studi ini adalah analisis panel regresi. Hasil dari penelitian ini adalah debt ratio memiliki pengaruh yang signifikan namun negatif terhadap nilai perusahaan dan profitabilitas perusahaan untuk itu, perusahaan direkomendasikan untuk memperhatikan tingkat hutang karena hal ini ternyata mempengaruhi investor dalam memutuskan invetasi dan juga perusahaan lebih baik menggunakan laba ditahan terlebih dahulu ketika membutuhkan dana. Kata Kunci: Struktur modal, Tangibility, GPM, OPM, ROA, ROE, nilai perusahaan, Analisis regresi panel data iii APPROVAL PAGE THE EFFECT OF CAPITAL STRUCTURE TO THE FIRM’S PROFITABILITY AND THE VALUE OF THE FIRM: A STUDY IN PROPERTY AND REAL ESTATE LISTED IN INDONESIAN STOCK EXCHANGE By NISRINA AFIAH ID No: 19014160 A Final Project in Partial Fulfillmentof the Requirement for the Degree of Bachelor of Management Undergraduate Program of Management Study School of Business and Management Institut Teknologi Bandung July 2017 Approved By __________________________ Dr. Subiakto Soekarno, MBA, CFP 115110003 iv FOREWORD Alhamdulillah, my gratitude to Allah SWT, I am so glad that I finally can finish my thesis to complete my Bachelor Degree of Management in School of Business and Management. 1. Thanks to my parents who always support me for the last three years especially during my thesis period. I am very grateful to have a wonderful discussion partner, my dad and also an awesome mother who always take care of me even though we cannot spend much time for the last few months. 2.