Intellectual Capital and Capital Structure on Firm Value with Profitability as an Intervening Variable: Study of Banking Subsector Companies Listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023

Abstract

Introduction: The stock price functions as a measure of how effectively a company's management employs its assets; this, consequently, reflects the firm's value to investors. A principal gauge of corporate worth is its stock price, which is influenced by market supply and demand. Shareholders' gains through investment returns stem directly from stock price appreciation, indicating enhanced business valuation.

Objectives: This riset aims to examine the interplay among intellectual capital, capital structure, and business value through the prism of profitability. Concentrating on financial subsector firms listed on the IDX (2019-2023), The study utilizes a quantitative methodology.

Methods: Secondary data were sourced from the official IDX portal and corporate disclosures, with purposive sampling applied to select the sample entities. The measurement model was scrutinised using SmartPLS 4.0 software via PLS-SEM.

Results: Findings reveal that intellectual capital elevates profitability directly yet exerts no significant influence on firm value. Conversely, capital structure markedly affects profitability then business value. Profitability neither mediates the relationship among intellectual capital, capital structure, and firm value nor significantly impacts company valuation.

Conclusions: The findings show that effective intellectual capital management improves profitability but does not necessarily increase firm value, likely due to the market's limited recognition of intangible assets. In contrast, high debt levels negatively affect profitability and firm value due to increased financial risk. Thus, banking companies should maintain a balanced capital structure and optimize intellectual capital to enhance firm value.