Determination of Company's Value: A Study with Investment Opportunity as a Moderator Variable

Abstract

This research focuses on the state of a company's valuation, which is always changing. The utilized variables to estimate firm value include free cash flow and interest rates, both of which have a positive relationship with company's value. The second purpose is to investigate the current situation of investment opportunities in industrial companies that are similarly highly volatile. The availability of free cash flow indicates the interest rate has a positive relationship with the investment opportunity set. An explanatory research design is used in this study, which aims to examine the correlation between variables. The manufacturing companies that were listed on the Indonesia Stock Exchange between 2013 and 2018 are the focus of this study. Thus, data were collected from 612 units using a purposive sampling technique. The findings reveal that whereas free cash flow has a strong positive indirect effect on company value via mediating the investment opportunity set, interest rates have a negative and minor indirect effect on firm value via mediating the investment opportunity set.