The market value of equity of manufacturing companies during the COVID-19 pandemic

Enni Savitri,Nik Herda Nik Abdullah,Tatang Ary Gumanti,Almasdi Syahza

doi:10.21511/imfi.18(4).2021.01

Abstract

The market value of a public company reflects the expectations of investors. It is influenced by many factors, both internal and external to the company. This study aims to analyze whether intellectual capital moderates the effect of the debt-to-equity ratio and earnings per share on the market value of equity. A set of historical data was collected and analyzed based on a sample of 114 manufacturing companies listed on the Indonesia Stock Exchange from 2017 to 2019. This study uses moderated regression analysis to test proposed hypotheses and a robustness test to examine the sensitivity and consistency of the study results. The findings show that the debt to equity ratio affects the market value of equity, whilst earnings per share does not affect the market value of equity. The analysis also shows that intellectual capital could strengthen the effect of the debt to equity ratio on the market value of equity. In contrast, intellectual capital could not strengthen the effect of earnings per share on the market value of equity. AcknowledgmentsThe study was conducted with the support of the Universitas Riau, Indonesia.

Highlights

Since manufacturing companies have the largest number of industrial sub-sectors, they often experience declines in the sales of goods
This paper examines whether intellectual capital moderates the effect of the debt-to-equity ratio and earnings per share on the market value of equity in manufacturing companies listed on the Indonesia Stock Exchange from 2017 to 2019
Moderated regression analysis results indicate that the debt-to-equity ratio has an effect on the market value of equity, earnings per share does not have an effect

Summary

Introduction

Since manufacturing companies have the largest number of industrial sub-sectors, they often experience declines in the sales of goods. A decline in sales will lead to a decline in the company’s revenue. This condition will affect the company’s profit, as well as the perceptions of investment decisions by investors, and affect the market value of equity (MVE). The efficiency of the rate return of shares profit can be seen when the profit earned in a certain year is compared with the capital used to generate the profit. Companies will share higher profits when they gain a high MVE (Berk et al, 2015; Abuzayed et al, 2009)

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Results

Conclusion