* Corresponding author: [email protected]
The Influence of Investment Decisions and Funding Decisions on Shareholder Value (Study on Manufacturing Companies
Listed on the Indonesia Stock Exchange Period 2016-2020)
ASNA AF’IDATUL ISMA*
FERINA NURLAILY Universitas Brawijaya, Indonesia
Abstract: This research aims to determine and analyze the influence of investment and funding decisions on shareholder value. In this research, 44 manufacturing listed companies on the Indonesia Stock Exchange period 2016-2020 were used as research samples. The sampling method is purposive; taking the samples is based on the researcher's criteria in advance. Data analysis methods in this investigation use Partial Least Square (PLS) with SmartPLS 3. The results of this investigation indicate that 1) Investment decisions have a positive and significant effect on shareholder value. 2) Investment decisions have a positive and significant effect on funding decisions. 3) Funding decisions have a negative and significant effect on shareholder value. 4) Indirect effect; investment decisions negatively and significantly affect shareholder value through funding decisions.
Keywords: Investment Decision; Funding Decision; and Shareholders Value
Abstrak—Tujuan dari penelitian ini yaitu untuk mengetahui dan menganalisis pengaruh keputusan investasi dan keputusan pendanaan terhadap nilai pemegang saham. Pada penelitian ini memakai 44 perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia periode 2016-2020 sebagai sampel penelitian. Metode pengambilan sampel yang dipakai adalah purposive sampling yaitu pengambilan sampel berdasarkan kriteria-kriteria yang sudah ditetapkan peneliti. Metode analisis data dalam penelitian ini adalah Partial Least Square (PLS) dengan SmartPLS 3. Hasil yang ditunjukkan dalam penelitian ini adalah 1) Keputusan investasi berpengaruh positif dan signifikan terhadap nilai pemegang saham. 2) Keputusan investasi berpengaruh positif dan signifikan terhadap keputusan pendanaan. 3) Keputusan pendanaan berpengaruh negatif dan signifikan terhadap nilai pemegang saham;
kemudian 4) Pengaruh tidak langsung yaitu keputusan investasi berpengaruh negatif dan signifikan terhadap nilai pemegang saham melalui keputusan pendanaan.
Kata Kunci: Keputusan Investasi, Keputusan Pendanaan, Nilai Pemegang Saham
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1. Introduction
Globalization today encourages companies to innovate so that companies can compete with competitors constantly. The company implements strategies to survive and wins the fierce business competition. The beginning of the company's goal was to get profits, but in modern terms, it has changed to maximize firm value. Companies are required to maximize firm value because investors consider that firm value a matter of consideration and assessment to invest its capital (Maretha et al., 2019). Investors will not be careless in raising their capital but will first observe those companies with good prospects.
Indonesia is one of the leading countries to invest in, especially in manufacturing (Kemenperin id, 2019). Manufacturing is a company that processes raw materials into finished products. Manufacture is one of the sectors investors are looking at and interested in because it is a sector advancing quite rapidly and an industry that dominates in contributing to GDP (Gross Domestic Product). If its performance declines, it will disrupt and trigger a slowdown in the Indonesian economy because manufacturing is one of the sectors driving the national economy.
Figure 1
Manufacturing Industry Gross Domestic Product (GDP) Growth Rate 2016-2020
Source: Badan Pusat Statistik, Processed by Researchers (2021)
Figure 1 shows that the GDP growth of the manufacturing sector declined sharply in 2020. This is due to the COVID-19 pandemic, which can impact the Indonesian economy. Despite these conditions, manufacturing is expected to survive because
4,26 4,29 4,27 3,8
-2,93 -4
-3 -2 -1 0 1 2 3 4 5
2016 2017 2018 2019 2020
183 manufacturing is a sector with great potential in product development and a significant market share. And then, it looks forward to providing more value; thus, investors are excited about investing their capital in maintaining stock price stability.
With the uncertainty of a condition, it is hoped that companies will be able to read and see the situation when the country's economy is contracting. The company's ability to implement management functions, especially in financial policy, can create and increase shareholder value (Muthoni, 2019). There are several important reasons why knowing how much the company creates value for shareholders is necessary. The company must be competitive to increase market activity in an increasingly competitive business world. Then, maintain investor relations so that funds remain available for the company's future growth needs and to help the company's long-term existence. In addition, investors consider that companies that create value are more attractive, which makes them more motivated to invest in those companies (Salehi et al. in Muthoni, 2019).
Knowing the value created by the company can be noticed from its returns for shareholders as measured by including the cost of capital in its calculations. Some measurements that can be used and have been used by researchers in the past, such as Atiyet (2012), Panigrahi et al. (2014), Handarini (2018), Gounder & Venkateshwarlu (2017), Siburian & Yohanes (2019) and Muthoni (2019) use EVA (Economic Value Added) and MVA (Market Value Added) in measuring shareholder value. According to Panigrahi et al. (2014), EVA and MVA are better performance measures than traditional ones. EVA is a calculation of the remaining income from the net profit that has been deducted from the cost of capital. Meanwhile, MVA is used to measure the value that the market perceives of the company and the potential wealth that the company will generate (Siburian & Yohanes, 2019)
The company's financial decisions are critical in knowing the business performance and affect shareholder value creation (Muthoni, 2019). The financial decisions are investment decisions and funding decisions (Aisyah, 2012). Investment decisions are an essential policy in financial management; besides that, investment decisions cannot be measured directly, so they require a proxy to measure them. According to Nisa (2014),
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to see and know how investment decisions in the future can use the concept of Investment Opportunity Set (IOS). A high IOS can indicate the company's profitable investment and growth prospects, and investors will be excited about buying and owning the shares (Nisa, 2014).
The following financial strategy is a funding decision. Funding decisions are about funding obtained to determine the right company’s capital structure. Investment and funding decisions are internal factors of the company that are reflected in management decisions, and these two decisions have the possibility of mutual influence. Ahmad &
Siahaan (2016) state that investment decisions can influence funding decisions. The greater the investment decision, the greater the funds needed to realize the investment project.
Based on previous research on investment decisions and funding decisions on shareholder value has been carried out by several researchers, but different results will still be found. Differences in research results related to investment decisions were found in Sumarau's research (2019), indicating that investment decisions have a positive and insignificant impact on the company's value. The outcome of this analysis is dissimilar to the analysis from Nisa (2014) and Tridewi (2014), stating that investment decisions have a positive and significant effect on the company's value. Analysis of the outcome is consistent with Asma & Redawati (2018) because investment decisions significantly affect the company's value.
An earlier study of funding decisions on shareholder value conducted by Atiyet (2012) found that funding decisions measured through self-financing, debt, and equity significantly affected the shareholder's value. The study's outcome is consistent with Handarini (2018) that debt and equity can significantly influence firm value.
Meanwhile, the study results differ from Sumarau's research (2019) that shareholder value cannot be influenced by funding decisions measured by debt and equity. Another study was conducted by Ahmad & Siahaan (2016) on investment decisions on funding decisions. The conclusion indicates that investment decisions positively but do not significantly affect funding decisions. These results differ from Tridewi's (2014)
185 research, indicating that investment decisions negatively and significantly impact funding decisions. Differences in research results were also found in Khanqah &
Ahmadnia (2013) and Asma & Redawati (2018), indicating that investment decisions had a positive and significant effect on funding decisions.
Empirical research about the impact of investment decisions on shareholder value was mediated by funding decisions (Asma & Redawati, 2018; Tridewi, 2014). These two studies have differences in results. In research by Asma & Redawati (2018), it was found that funding policies can mediate the correlation between investment policies and company value negatively and significantly. Meanwhile, the research results from Tridewi (2014) show that investment decisions affect firm value through positive and significant funding decisions.
Based on the phenomena and research gaps that have been explained, it is known that there are still some problems and there are still differences in research results. So researchers are interested in discussing "The Influence of Investment Decision and Funding Decisions on Shareholder Value".
2. Theoretical Framework and Hypothesis Development 2.1 Theoretical Framework
2.1.1 Signaling Theory
Signal theory is that the owner of the information gives a signal in the form of information that describes the company's condition that is useful for the recipient (investor) as a good or bad sign. Investment expenditure is a good sign of business growth in times to come. If companies use debt as a source of funding, investors will be confident in the company's capability to carry out its obligations so that it becomes a positive signal (Sugeng, 2017). However, suppose the company uses equity funding. In that case, it suggests that the company avoids debt funding because it is not confident in its ability to meet fixed debt obligations, which is a negative signal.
2.1.2 Pecking Order Theory
Pecking order theory describes the corporation funding hierarchy as prioritizing internal funding and using external funding if internal funding is insufficient. Pecking
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order theory states that the corporation chooses to use internal sources of funds from retained earnings rather than external sources of funds.
2.1.3 Trade-off Theory
According to Brigham & Houston (2011), the trade-off theory reveals that the company interchanges tax benefits derived from debt funding with problems caused by the potency of corporate bankruptcy.This theory encourages the company not to overdo it in the use of debt for its capital structure.
2.3.2 Investment Decisions
Following Tandelilin (2017), investment is a commitment to many funds that are carried out to get benefits in the coming time. Meanwhile, investment decisions involve allocating and reallocating a company's funds to carry out several projects and investment activities (Ahmad & Siahaan, 2016). Investment decisions cannot be observed directly, so they require proxies to measure them (Kallapur & Trombley, 1999). This conceptualization of decision measurement can use IOS (Investment Opportunity Set) proxies, and there are three categories: price-based, investment, and variant-based proxies.Myers, who introduced IOS in 1977, means that it is a composite of assets owned with investment opportunities in time to come.
2.1.4 Funding Decisions
Corporate funding decisions are related to the decision regarding the composition of funding. According to Sugeng (2017, p. 220), funding decisions are one of the central policies in finance management that aim to seek the funds the company needs in the most profitable (rational) way and can increase firm value. The financial ratios that show the company's funding decisions are internal funding (self-financing) and external funding (debt and equity).
2.1.6 Shareholder Value
Shareholders are financiers who become company owners by expecting returns when purchasing company shares (Samryn, 2012, p. 423). According to Tarjo in Munandar & Kusumawati (2017), that shareholder value is a stock market participant providing value to the company's performance. According to Oladele in Muthoni
187 (2019), "Shareholder value is considered to play a key role in measuring corporate business performance because maximizing shareholder wealth is regarded as one of the most proper goals because it includes incentives for efficient growth in the long term and creation of value".
Figure 2
Conceptual model
Source: Data Processed by Researcher (2021)
2.2 Hypothesis Development
2.2.1 Effect of investment decisions on shareholder value
Investment decisions are critical financial decisions and affect shareholder value.
Investment decisions can determine and influence shareholder value (Fama, 1978).
Investment decisions will affect shareholder value if higher investment activities are carried out, so the higher the opportunity for company growth (Ahmad & Siahaan, 2016). Companies can earn more significant profits by taking advantage of investment opportunities. Investment decisions measured by IOS can indicate that a company's investment and growth prospects are good if the yield is high. Based on the signal theory that investment expenditures made by the company will be perceived as positive signals by investors because the investment decisions made contain information and signals that contain the company's growth in time to come. The conclusion of previous research conducted by Nisa (2014) and Asma & Redawati (2018) showed that investment decisions significantly impacted the company's value. So this research paper formulates the following hypothesis:
H1: Investment decisions have a significant effect on shareholder value
Investment Decision
Funding Decision
Shareholder Value
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2.2.2 Effect of investment decisions on funding decisions
Investment decisions influence funding decisions if the company is increasingly taking investment opportunities. This is because the more significant the company's investment opportunities, the greater the funds needed to realize them (Ahmad &
Siahaan, 2016). Based on the pecking order theory, the company will prioritize internal funding first, and if it is not enough, it will use external funds. Supplementing external funding with debt and equity will affect the company's capital structure. So that every time there is a change in the company's investment decision, it will affect the funding decision. The research results can prove this from Khanqah & Ahmadnia (2013), and Asma & Redawati (2018) demonstrate that investment decisions significantly impact funding decisions. So the hypothesis of this research is formulated as follows:
H2: Investment decisions have a significant effect on funding decisions 2.2.3 Effect of funding decisions on shareholder value
The funding decision is one of the central policies in financial management that aims to seek the necessary funds for the company most profitably and can increase the firm value (Sugeng, 2017, p. 220).Funding decisions can affect shareholder value if the companies implement an optimal capital structure that is a structure of capital that minimizes capital costs (Tridewi, 2014). Based on the pecking order theory, the funding hierarchy is preceded by internal funding and then continued with external funding.
Meanwhile, based on signaling theory, the assumption of issuing debt is a positive sign because the market considers the company capable of paying a debt. However, suppose you increase equity by issuing new shares. In that case, it will give a negative signal because the company will be overvalued, so it has the potential to reduce the stock price (Muthoni, 2019). However, based on the trade-off, the theory is that when larger the debt, the greater the potential for bankruptcy. The significant influence on this hypothesis can be proven by the results of research from Nisa (2014), Ahmad & Siahaan (2016), Asma & Redawati (2018), and Handarini (2018), showing that funding decisions have a significant effect on company value. The hypothesis of this research is formulated as follows;
H3: Funding decisions have a significant effect on shareholder value
189 2.2.4 Effect of investment decisions on shareholder value through funding decisions
Investment decisions affect shareholder value through funding decisions. This influence will be created if the company's ability to maximize investment by making efforts to generate profits according to the funds used. The implementation of the investments made requires funds to realize them. The funds can be obtained from internal and external funding, referred to as funding sources. According to the pecking order theory, the company chooses internal funding from retained earnings over external funding because external funding can increase the cost of capital. So that the more investment activities, the more funds are needed to finance investment activities.
However, according to signal theory, investment activities can make a positive sign to investors because it reflects the company's prospects. So that indirectly investment decisions affect shareholder value through funding decisions. This can be proven empirically based on Asma & Redawati (2018) and Tridewi (2014) that funding decisions can significantly mediate the correlation between investment decisions and the company's value.
H4: Investment decisions significantly affect shareholder value through funding decisions.
3. Research Method
Explanatory research with a quantitative methodology is this type of research.
Manufacturing listed companies on the Indonesia Stock Exchange (IDX) are research locations by access to the website:www.idx.co.id. This study used exogenous variables and endogenous variables. The variables in this study used indicators to measure them.
The exogenous variable is investment decisions (X) using four indicators from the IOS concept, the indicators (Myers in Marinda, 2014) are:
1) Market Value Equity to Book Value Equity (MVEBVE) (X1)
This ratio describes the return assessed by the market through the company's investment.
MVEBVE = Outstanding Shares x Market Price Total Equity
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2) Market Value Asset to Book Value Asset (MVABVA) (X2)
This ratio explains that the firm growth prospects are reflected in the stock price, whether it is valued to grow or not in terms of the value of assets more significant than its book.
MVABVA = TA-TE + (Outstanding Share x Market Price) Total Asset
3) Capital Expenditure to Market Value Asset (CAPMVA) (X3)
This ratio is used to see that the additional flow of capital is according to the asset's market price.
CAPMVA = (Book Value ATt – Book Value ATt-1) TA-TE + (Outstanding Share x Market Price) 4) Capital Expenditure to Book Value Asset (CAPBVA) (X4)
This ratio explains a capital flow based on the book value of assets.
CAPBVA = Book Value ATt – Book Value ATt-1
TA
In the endogenous variable, namely the funding decision (Z), which is also a mediation variable, the indicators are as follows:
1) Debt to Asset Ratio (DAR) (Z1)
This ratio compares total debt to assets and describes the large portion of the company's assets financed from the source of debt.
DAR = Total Debt Total Asset Source: (Sugeng, 2017)
2) Debt to Equity Ratio (DER) (Z2)
This ratio compares total debt to total equality and describes funding derived from equity.
DER = Total Debt Total Equity Source: (Sugeng, 2017)
191 4) Self-financing (SF) (Z3)
This ratio is the total operating cash flow reduced by dividends divided by the invested capital.
SF = Cash Flow – Dividends Invested Capitals Source: (Atiyet, 2012).
The following endogenous variable is shareholder value (Y). The indicators are as follows:
1) Economic Value Added (EVA) (Y1)
EVA is used to help corporate entities that focus on the use of capital and how to make a profit (Panigrahi et al., 2014).
EVA = NOPAT – (WACC x Invested Capital) Source: Stern and Stewart in Panigrahi et al., (2014) 2) Market Value Added (MVA) (Y2)
MVA is an instrument to measure the value that the market perceives of the company and the potential wealth that will be generated by the company (Siburian
& Yohanes,2019).
MVA= Total Market Value of Equity (MV) - Total Book Value of Equity (BV) Source: Siburian & Yohanes (2019) and Atiyet (2012)
The population in this study is all manufacturing sectors the company registered on IDX. Sampling uses purposive sampling techniques, namely by determining the criteria set by the researcher. The criteria are manufacturing companies registered with IDX in 2016-2020, presenting financial statements, financial statements in the form of rupiah, and having no negative profit and equity during 2016-2020. Those that meet these criteria are 44 companies. This research data comes from secondary data on the company's management of finances. The method uses descriptive analyses and Partial Least Square (PLS) with SmartPLS 3.
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4. Results and Discussion 4.1 Descriptive Analysis Results Table 1
Table Descriptive Analysis Result
Source: Output SmartPLS 3.3.3
Based on table 1 shows that Indicators X1 (MVEBVE) and X2 (MVABVA) have average values of 4,259 and 2,494. This indicates that having these indicators is quite good. Indicators X3 (CAPMVA) and X4 (CAPBVA) have Mean values of 0.033 and 0.036. This indicates that both indicators are not good. Mean Z1 (DAR) of 0.378 indicates that DAR in the manufacturing company that was sampled by the study was quite good. Mean Z2 (DER) and Z3 (SF) of 0.936 and 0.093 indicates that the DER and SF in the manufacturing company sampled by the study were not good. Mean Y1 (EVA) and Y2 (MVA) of 535,012,791,134 and 29,565,231,557,649 indicates that EVA and MVA in the manufacturing company sampled for the study are good because they have an operating profit greater than the cost of capital.
Indicator Minimum Maximum Mean Std. Deviation
X1 0.222 82.444 4.259 9.902
X2 0.304 23.286 2.494 3.251
X3 -0.110 0.977 0.033 0.109
X4 -0.074 0.616 0.036 0.082
Z1 0.077 0.807 0.378 0.181
Z2 0.083 4.190 0.936 0.813
Z3 -1.981 0.556 0.093 0.180
Y1 -32,929,714,438,816 11,811,056,026,371 535,012,791,134 3,418,711,471,559 Y2 -18,992,122,475,000 516,071,518,737,000 29,565,231,557,649 75,793,965,845,587
193 4.2 PLS Test Results
4.2.1 Evaluating of Outer Model
The reflective indicator model has three criteria for evaluating it, namely:
1. Convergent Validity Table 2
Table Outer Loading
Construct Investment
Decision Funding Decision Shareholder Value
MVEBVE (X1) 0.970
MVABVA (X2) 0.974
CAPMVA (X3) -0.263
CAPBVA (X4) -0.162
EVA (Y1) 0.813
MVA (Y2) 0.948
DAR (Z1) 0.926
DER (Z2) 0.969
SF (Z3) -0.030
Source: Output SmartPLS 3.3.3
The convergent validity criterion is to have an outer loading value of more than 0.7 (Ghozali, 2014). Based on table 2 shows that three indicators do not meet the criteria, namely CAPMVA (X3), CAPBVA (X4), and SF (Z3), so the three indicators are removed from the model. The AVE value also supports the removal of this indicator in table 3 because the AVE value in the investment decision is less than 0.5 due to an invalid indicator. AVE value is said to be good if the value is above 0.5 (Ghozali, 2014).
Table 3
Table Average Variance Extracted (AVE)
Construct Average Variance Extracted (AVE)
Investment Decision 0,496
Funding Decision 0,599
Shareholder Value 0,780
Source: Output SmartPLS 3.3.3 2. Discriminant Validity
The discriminant validity criterion is that the construct correlation value is higher than its latent variable. So based on table 4, indicators that have not met the criteria for discriminant validity are CAPMVA (X3), CAPBVA (X4), and SF (Z3). These results
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also confirm that the three indicators are invalid in measuring latent variables (investment and funding decisions).
Table 4
Table Cross Loading
Construct Investment
Decision Funding Decision Shareholder Value
MVEBVE (X1) 0.970 0.410 0.619
MVABVA (X2) 0.974 0.278 0.697
CAPMVA (X3) -0.263 -0.136 -0.090
CAPBVA (X4) -0.162 -0.099 -0.063
EVA (Y1) 0.377 0.008 0.813
MVA (Y2) 0.720 0.160 0.948
DAR (Z1) 0.262 0.926 0.053
DER (Z2) 0.390 0.969 0.150
SF (Z3) 0.043 -0.030 -0.001
Source: Output SmartPLS 3.3.3 3. Composite Reliability Table 5
Table Composite Reliability
Construct Cronbach's Alpha rho_A Composite Reliability
Investment Decision 0.563 0.938 0.534
Funding Decision 0.448 0.993 0.743
Shareholder Value 0.739 0.934 0.876
Source: Output SmartPLS 3.3.3
The criteria in composite reliability are having a standard for Cronbach's Alpha and composite reliability of more than 0.7. Based on table 5, the standard of Cronbach's alpha and composite reliability is less than 0.7, thus corroborating that the indicators in investment decisions and funding decisions are removed because they are invalid and do not have good enough reliability as a measuring tool.
The conclusion based on outer model test results is that CAPMVA (X3), CAPBVA (X4), and SF (Z3) indicators were removed from the model because they did not meet the criteria. Following is the result of the outer model (PLS Algorithm) in SmartPLS after removing three invalid and reliable indicators. The result is as follows:
195 Figure 3
Figure Outer Model (PLS Algorithm)
Source: Output SmartPLS 3.3.3 4.2.2 Evaluating of Inner Model 1. R-Square
Table 6
Table R-Square
R Square
Funding Decision 0.120
Shareholder Value 0.463
Source: Output SmartPLS 3.3.3
R-Square is the magnitude of the variation of endogenous variables that exogenous variables can define. According to Chin in Ghozali (2014) suggested R2 values for endogenous latent variables on the basis of 0.67 (substantial), 0.33 (moderate) and 0.19 (weak). According to the results in the R-Square table, investment decisions are categorized as weak, and shareholder value is categorized as moderate.
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4.2.3 Hypothesis Test 1. Path Coefficient Table 7
Table Path Coefficient Original
Sample (O)
Sample Mean
(M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P
Values Conclusion Investment
Decision ->
Funding Decision
0.347 0.330 0.108 3.210 0.001 Significant Investment
Decision ->
Shareholder Value
0.714 0.709 0.076 9.345 0.000 Significant Funding
Decision ->
Shareholder Value
-0.129 -0.125 0.045 2.872 0.004 Significant Source: Output SmartPLS 3.3.3
2. Specific Indirect Effect Table 8
Table Specific Indirect Effect
Original Sample
(O)
Sample Mean
(M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P
Values Conclusion Investment
Decision ->
Funding Decision ->
Shareholder Value
-0.045 -0.041 0.020 2.242 0.025 Significant
Source: Output SmartPLS 3.3.3 4.3 Discussion
4.3.1 Effect of investment decision on shareholder value
Based on table 11 conclusion of the hypothesis test indicates that investment decisions have a positive and significant effect on shareholder value. As a result, hypothesis 1 in this study is accepted. This result is based upon the signaling theory that the company's capital expenditure on investment activities can give a positive sign to
197 investors because investors consider that the investment activities carried out will add assets or wealth, and companies will have excellent growth prospects for the future. So that investors are passionate about investment and influence the increase in the stock market price. Findings of investment decisions have a direct effect on value for the shareholder and are the result of investing activities themselves through the project selections or other policies. So investment decisions have a long-term influence on the company's growth in the time to come. The greater investing activities, the greater the company's value and vice versa. The lower the investment activity, the lower value of the company. The company values can increase shareholder value if the stock price goes up, where the stock price is one of the indicators of firm value (Hasnawati, 1998). This study's outcome agrees with an earlier study from Nisa (2014) and Asma & Redawati (2018), indicating that investment decisions have a positive and significant effect on company values.
4.3.2 An effect of investment decision on the funding decision
Based upon the hypothesis test's conclusion that investment decisions have a positive and significant effect on funding decisions, hypothesis 2 in this study is accepted. Investment decisions illustrate investment opportunities in the future, but this also depends on the spending policies set by companies. So the higher the investment decision taken by companies, the higher the funds needed and will be the source of funds through debt or equity, while these two fundings will change the company's capital structure. So that positively impacts investment decisions on funding decisions; this occurs due to changes when companies increase or decrease their investment policies.
The outcome of this study is consistent with earlier research from Asma & Redawati (2018) revealed that investment decisions have a positive effect on funding decisions, and also consistent with Khanqah & Ahmadnia (2013) shows that in conditions of high and low uncertainty, the correlation among investment decisions and funding decisions is positive and significant.
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4.3.3 Effect of funding decision on shareholder value
Based on the conclusion of the hypothesis tests indicating the funding decisions had negatively and significantly affected shareholder value, hypothesis 3 as part of this study is accepted. The pecking order theory confirms that the higher the debt in the capital structure, the lower the profitability and gives a negative signal to the stock price, which impacts lowering firm value. The trade-off theory also confirms that companies are encouraged not to overdo debt because debt can increase firm value under certain conditions (Panigrahi et al., 2014). In addition, it is also supported by the signal theory that the company adds external funds through equity with new shares gives an unfavorable signal for the company because the number of shares increases and the presence of new shareholders, so it is responded to negatively by shareholders (Atiyet, 2012). So the direction of negative influence in this study caused investor anxiety due to the increased risk of bankruptcy of companies due to the addition of debt and equity.
Increasing the two funding sources has increased interest and capital costs for the company. The high cost reduces the profits that investors will get, so it will respond negatively, reducing investor interest in investment and causing stock prices to decrease.
This result is supported by research from Nisa (2014) and Ahmad & Siahaan (2016) that funding decisions had negatively and significantly affected company value. This research also supports the results from Atiyet (2012) and Asma & Redawati (2018) that funding decisions positively and significantly impact shareholder value creation. 4.3.4 Effect of investment decision on shareholder value through funding decision
Based on the hypothesis, test results indicate that the influence of investment decisions on shareholder value is negative and significant through funding decisions, so hypothesis 4 in this study is accepted. Capital expenditure for investment activities is a good signal for investors; thus, investment decisions influence shareholder value. The higher the investment decision, the greater the funding needed. So along with the increase in investment activity implemented by the company, the funding also increases and is accompanied by enhancement costs of capital. The result is reduced profits earned by shareholders, which is responded to negatively by investors and has an impact on
199 decreasing stock prices and shareholder value. So the possibility that this occurs causes indirectly affected investment decisions on shareholder value to have a negative and significant effect through funding decisions. This result is in line with Asma &
Redawati's (2018) research that investment decisions negatively affect firm value through funding decisions. This research also supports Tridewi's (2014) result that investment decisions can affect firm value through funding decisions positively and significantly.
5. Conclusion, Limitation, and Implication
From the results of research and supporting theories, be able to conclude that investment decisions have positively and significantly affected shareholder value and funding decisions in this study. Funding decisions have negatively and significantly affected shareholder value. The partial influence of investment decisions on shareholder value has a negative and significant effect on funding decisions.
This research has limitations that require improvement for subsequent research. 1) Researchers can then add, replace or expand the indicators used and add variables that are considered to affect shareholder value. 2) Researchers are then hoping to add control variables.
The implication of this research is that investment decisions affect shareholder values positively and significantly, meaning that an increase in investing activities can increase shareholder value because investors consider that the company is taking advantage of opportunities and has good prospects. Investment decisions have significantly affected funding decisions, meaning that the higher the investment activity, the higher funds to finance investment activities. So the company must make the right decisions for these two financial decisions. Funding decisions have a negative and significantly affected shareholder value. The consequences of this study make companies have to be more careful in determining the source of funding and its capital structure because the higher funding decision can reduce shareholder value. Then the partial influence of investment decisions on shareholder value has negatively and significantly affected mediate by funding decisions. These outcomes show that it is
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essential for the company to implement optimally in implementing investment decisions because it can grow companies prospects in the future and increase shareholder value while still paying attention to funding in the company's capital structure.
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