Companies should manage their capital structure wisely

Oct 13, 2025 by windailys.com 42 views

Effect of Capital Structure, Company Growth, and Profitability on Corporate Value in Coal Mining Subsector Companies in 2013 - 2017

Introduction

The coal mining sector is a significant contributor to the global economy, and companies operating in this sector must be able to manage their resources effectively to remain competitive. One of the key factors that affect the value of a company is its capital structure, which refers to the combination of debt and equity used to fund its assets. In addition to capital structure, company growth and profitability are also crucial factors that can impact a company's value. This study aims to investigate the effect of capital structure, company growth, and profitability on corporate value in coal mining subsector companies listed on the Indonesia Stock Exchange during the period 2013 to 2017.

Capital Structure: The Foundation of a Company's Value

The capital structure of a company refers to the mix of debt and equity used to fund its assets. In the context of coal mining companies, the use of debt can accelerate growth by providing additional funds for investment, but also brings higher risks. A company's capital structure can have a significant impact on its value, as it affects the company's ability to generate cash flows and pay dividends to shareholders. A well-managed capital structure can help a company to increase its production capacity and, ultimately, its market value.

Company Growth: The Key to Increasing Value

Company growth can be measured through increased income, expansion of assets, and increasing market share. Research shows that mining companies capable of showing consistent growth tend to have a higher company value. Positive growth not only reflects good financial performance, but also creates trust among investors. In the period under study, company growth has proven to be a key factor in increasing the company's attractiveness in the eyes of investors, thus contributing to increasing company value.

Profitability: The Driver of Company Value

Profitability reflects a company's ability to generate profits from the income earned. This is very important because high profits allow companies to reinvest and pay dividends to shareholders. Analysis of this study shows that profitability has a significant effect on company value. Coal mining companies that are able to maintain high profit margins will be better able to attract investors' attention, thereby increasing the value of their company.

The Simultaneous Effect of Capital Structure, Company Growth, and Profitability

These three factors - capital structure, company growth, and profitability - not only have individual effects, but also simultaneously. The results showed that when the three variables were at the optimal level, the company's value could increase significantly. This shows the importance of the company to not only focus on one aspect, but also pay attention to the synergy between the three factors in the company's management strategy.

Conclusion

Overall, this research confirms that the capital structure, company growth, and profitability have a significant influence on the company's value in the coal mining sector listed on the Indonesia Stock Exchange. Therefore, companies in this sector must consider and manage these three factors wisely in order to be able to improve the company's performance and value in a sustainable manner. Success in managing these three aspects will be the key for companies to achieve better competitiveness in the market.

Recommendations

Based on the findings of this study, the following recommendations are made:

Companies should manage their capital structure wisely: Companies should aim to maintain an optimal capital structure that balances debt and equity to minimize risks and maximize returns.
Companies should focus on sustainable growth: Companies should prioritize sustainable growth by investing in assets that generate long-term returns and maintaining a strong market position.
Companies should prioritize profitability: Companies should aim to maintain high profit margins by optimizing their operations and managing costs effectively.
Companies should pay attention to the synergy between the three factors: Companies should pay attention to the synergy between capital structure, company growth, and profitability to maximize their value.

Limitations of the Study

This study has several limitations that should be noted:

Data limitations: The study is based on data from 21 companies listed on the Indonesia Stock Exchange, which may not be representative of the entire coal mining sector.
Time period limitations: The study is based on data from 2013 to 2017, which may not reflect the current market conditions.
Methodological limitations: The study uses a quantitative approach, which may not capture the nuances of the coal mining sector.

Future Research Directions

This study provides several avenues for future research:

Investigating the impact of other factors on company value: Future studies can investigate the impact of other factors, such as market conditions, regulatory changes, and technological advancements, on company value.
Examining the effect of capital structure, company growth, and profitability on company value in other sectors: Future studies can examine the effect of these factors on company value in other sectors, such as oil and gas, or manufacturing.
Developing a more comprehensive model of company value: Future studies can develop a more comprehensive model of company value that incorporates multiple factors and variables.
Frequently Asked Questions (FAQs) on the Effect of Capital Structure, Company Growth, and Profitability on Corporate Value in Coal Mining Subsector Companies

Q: What is the significance of capital structure in a company's value?

A: Capital structure refers to the combination of debt and equity used by a company to fund its assets. A well-managed capital structure can help a company to increase its production capacity and, ultimately, its market value.

Q: How does company growth impact a company's value?

A: Company growth can be measured through increased income, expansion of assets, and increasing market share. Research shows that mining companies capable of showing consistent growth tend to have a higher company value.

Q: What is the role of profitability in a company's value?

A: Profitability reflects a company's ability to generate profits from the income earned. High profits allow companies to reinvest and pay dividends to shareholders, making them more attractive to investors.

Q: How do these three factors - capital structure, company growth, and profitability - interact with each other?

A: The results of this study show that when the three variables are at the optimal level, the company's value can increase significantly. This highlights the importance of synergy between these factors in a company's management strategy.

Q: What are the implications of this study for companies in the coal mining sector?

A: Companies in the coal mining sector must consider and manage these three factors wisely in order to be able to improve their company's performance and value in a sustainable manner.

Q: What are the limitations of this study?

A: This study has several limitations, including data limitations, time period limitations, and methodological limitations.

Q: What are the future research directions based on this study?

A: This study provides several avenues for future research, including investigating the impact of other factors on company value, examining the effect of capital structure, company growth, and profitability on company value in other sectors, and developing a more comprehensive model of company value.

Q: What are the recommendations for companies in the coal mining sector based on this study?

A: Companies should manage their capital structure wisely, focus on sustainable growth, prioritize profitability, and pay attention to the synergy between the three factors.

Q: How can companies in the coal mining sector apply the findings of this study to improve their performance and value?

A: Companies can apply the findings of this study by:

Conducting a thorough analysis of their capital structure and making adjustments as needed.
Developing a growth strategy that prioritizes sustainable growth and increasing market share.
Focusing on profitability by optimizing operations and managing costs effectively.
Paying attention to the synergy between capital structure, company growth, and profitability in their management strategy.

Q: What are the potential benefits of applying the findings of this study to improve company performance and value?

A: The potential benefits of applying the findings of this study include:

Improved company performance and value.
Increased competitiveness in the market.
Enhanced investor confidence and attraction.
Better management of risks and opportunities.

Q: What are the potential challenges of applying the findings of this study to improve company performance and value?

A: The potential challenges of applying the findings of this study include:

Difficulty in implementing changes to capital structure and growth strategy.
Resistance to change from employees and stakeholders.
Limited resources and budget constraints.
Complexity of managing multiple factors and variables.