<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The level of firms’s ability to create value relative to invested capital (LACVIC) is proxied by Price to Book Value Ratio. Price to Book Ratio is also a proxy of firm value. The purpose of this study was to examine the effect of growth, profitability, size and assets tangibility on the level of firm’s ability to create value with probability of financial distress as an intervening variable. This study was conducted on public companies in Indonesia during the periods of 2013 – 2017. The panel data were analyzed by using Partial Least Square. Results indicate that assets tangibility has positive and significant effect on financial distress probability. Financial distress probability has no significant effect on LACVIC. Profitability, firm size, and assets tangibility have significant effects LACVIC directly, but they have no significant effect on it trough financial distress probability. It is indicating that financial distress probability does not act as an intervening variable. The implication is that companies should not have much assets tangibility because it can increase financial distress probability and decrease LACVIC</p>
</abstract>

The level of firms’s ability to create value relative to invested capital (LACVIC) is proxied by Price to Book Value Ratio. Price to Book Ratio is also a proxy of firm value. The purpose of this study was to examine the effect of growth, profitability, size and assets tangibility on the level of firm’s ability to create value with probability of financial distress as an intervening variable. This study was conducted on public companies in Indonesia during the periods of 2013 – 2017. The panel data were analyzed by using Partial Least Square. Results indicate that assets tangibility has positive and significant effect on financial distress probability. Financial distress probability has no significant effect on LACVIC. Profitability, firm size, and assets tangibility have significant effects LACVIC directly, but they have no significant effect on it trough financial distress probability. It is indicating that financial distress probability does not act as an intervening variable. The implication is that companies should not have much assets tangibility because it can increase financial distress probability and decrease LACVIC

Factors Affecting the Level of Firm’s Ability to Create Value Relative to Capital Invested and Financial Distress Probability

HOLISTICA – Journal of Business and Public Administration

This work is licensed under the Creative Commons Attribution 4.0 International License.

The level of firms’s ability to create value relative to invested capital (LACVIC) is proxied by Price to Book Value Ratio. Price to Book Ratio is also a proxy...

Factors Affecting the Level of Firm’s Ability to Create Value Relative to Capital Invested and Financial Distress Probability

Data publikacji: 09 gru 2021

Zakres stron: 101 - 114

Otrzymano: 01 wrz 2021

Przyjęty: 01 lis 2021

DOI: https://doi.org/10.2478/hjbpa-2021-0025

Słowa kluczowe
company’s health level, financial distress probability, the level of firms’s ability to create value relative to invested capital, tangibility

© 2021 Khaira Amalia Fachrudin, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Factors Affecting the Level of Firm’s Ability to Create Value Relative to Capital Invested and Financial Distress Probability

Data publikacji: 09 gru 2021

Zakres stron: 101 - 114

Otrzymano: 01 wrz 2021

Przyjęty: 01 lis 2021

DOI: https://doi.org/10.2478/hjbpa-2021-0025

Słowa kluczowecompany’s health level, financial distress probability, the level of firms’s ability to create value relative to invested capital, tangibility

© 2021 Khaira Amalia Fachrudin, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Słowa kluczowe
company’s health level, financial distress probability, the level of firms’s ability to create value relative to invested capital, tangibility