CAPITAL STRUCTURE NONLINEAR INVERTED U-SHAPED EFFECT ON FIRM VALUE WITH PROFITABILITY MODERATION
DOI:
https://doi.org/10.29303/jaa.v11i1.900Keywords:
Inverted U-Shaped Effect, Nonlinear Analysis, Optimal Debt Level, Profitability ModerationAbstract
This study aims to examine the nonlinear effect of capital structure on firm value and the moderating role of profitability in energy sector companies listed on the Bursa Efek Indonesia during the 2020–2024 period. This quantitative study uses a total of 314 observations selected through purposive sampling. The dataset constitutes an unbalanced panel because not all companies have observations for every year during the study period. The data are analyzed using quadratic regression and Moderated Regression Analysis (MRA). The results indicate that capital structure has a statistically significant inverted U-shaped effect on firm value. Firm value increases as debt levels rise until an optimal threshold is reached, after which further increases in debt are associated with declining firm value. However, profitability does not significantly moderate the nonlinear effect of capital structure on firm value. These findings are consistent with trade-off theory and provide empirical evidence of an optimal capital structure in Indonesia’s capital-intensive and volatile energy sector.
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