INVESTMENT OPPORTUNITY SET AND FIRM VALUE: THE ROLES OF FIRM POLICIES IN INDONESIAN FIRMS

Erlina

Fakultas Ekonomi Universitas Sumatera Utara
Jalan Dr. T. Mansur No. 9, Kota Medan Sumatera Utara

Abstract: This paper attempts to synthesize the linkages between investment opportunity set (IOS), firm value, managerial ownership and firm policies in Indonesia. As a meas­ure of growth, IOS is hy­pothesized to have a positive relationship with firm value. However, we argue that the linkage may not be direct, for there is a role played by firm policies on dividend and capital structure. The rela­tionship between IOS and firm value could be mediated by firm policies, as determined by the agents of the firm, namely the managers. However, Indonesia is a unique developing market char­acterized by high ownership concentration and low level of managerial ownership. This could therefore moderate the link between firm growth rate and firm policies on dividend and capital structure. Based on the theories and previous studies, this paper puts forward some propositions.

Keywords: investment opportunity set, firm value, firm policy

Jurnal Akuntansi dan Keuangan FE UMS
Volume 7 No 1, April 2008

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