Abstract
Much research has been conducted on the financial leverage. The research result generally reveals that the financial leverage is positively correlated with firm value. Cross-sectional data and path analysis method was used for this research. The path analysis was a method for studying pattern of causation among a set of fundamental variables. Based the research method, this study was finding several important result. First: The sample of research was meet only one of three basic assumptions MM. Second: the Average of the stock price for 30 calendar days after announcement financial report could be used for predict the firm value. Third: The Debt/Equity was positive significant to the firm value. Fourth: The effect model of financial leverage to the firm value was linear. Those results were supporting the hypothesis MM that the debt financing resulted in a higher value for the firm than equity financing.
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