Issue

Vol. 12 No. 1 (2025): June

Date Log

Submitted
8 November 2024
Accepted
27 June 2025
Published
27 June 2025

Copyright (c) 2025 Dara Ayu Nianty, Rustan DM., Sylvia Sylvia (Author)

Creative Commons License

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

Between Profit and Value: Can Capital Structure Carry the Weight?

https://doi.org/10.24252/minds.v12i1.52311
Dara Ayu Nianty
Institut Teknologi dan Bisnis Nobel Indonesia, Indonesia
Rustan DM.
Institut Teknologi dan Bisnis Nobel Indonesia, Indonesia
Sylvia Sylvia
Institut Teknologi dan Bisnis Nobel Indonesia, Indonesia

Corresponding Author(s) : Dara Ayu Nianty

dara@stienobel-indonesia.ac.id

Jurnal Minds: Manajemen Ide dan Inspirasi, Vol. 12 No. 1 (2025): June

Abstract

The Jakarta Islamic Index (JII) showcases firms with strong competitive advantage and investment appeal grounded in transparency and Sharia compliance. This study deepens understanding of capital structure dynamics by analyzing how profitability and growth opportunities shape firm value, both directly and through financial leverage. Drawing from a sample of 60 observations across 30 listed JII firms, the study employs panel data path analysis to test hypothesized relationships. Findings reveal that both profitability and growth opportunity significantly influence capital structure and firm value. Moreover, capital structure independently affects firm value, though it does not mediate the impact of the two antecedents. These insights refine capital structure theory in an Islamic equity context and illuminate the nuanced role of financial strategy in value creation. Practically, the results guide investors in screening high-potential Sharia-compliant firms and support managers in crafting funding strategies aligned with both financial performance and Islamic principles.

Keywords

Capital Structure Firm Value Profitability Growth Opportunity Signaling Theory
Nianty, D. A., DM., R., & Sylvia, S. (2025). Between Profit and Value: Can Capital Structure Carry the Weight?. Jurnal Minds: Manajemen Ide Dan Inspirasi, 12(1), 137–148. https://doi.org/10.24252/minds.v12i1.52311
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
References
  1. Akhtar, F., & Das, N. (2020). Investor personality and investment performance: from the perspective of psychological traits. Qualitative Research in Financial Markets. https://doi.org/10.1108/QRFM-11-2018-0116
  2. Alarussi, A. S., & Alhaderi, S. M. (2018). Factors affecting profitability in Malaysia. Journal of Economic Studies, 45(3), 442–458. https://doi.org/10.1108/JES-05-2017-0124
  3. Alzoubi, T. (2017). Profitability of Islamic financing tools. Banking and Finance Review.
  4. Aparicio, S., Urbano, D., & Audretsch, D. (2016). Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence. Technological Forecasting and Social Change, 102, 45–61. https://doi.org/https://doi.org/10.1016/j.techfore.2015.04.006
  5. Astuty, D. W. (2015). The Extraordinary Solution for Indonesia Economic Crisis: Shariah Capital Market. Journal of Islamic Banking and Finance. https://doi.org/10.15640/jibf.v3n2a5
  6. Audretsch, D., Agarwal, R., Audretsch, D., & Sarkar, M. B. (2014). The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship, and Economic Growth. In Public Policy in the Entrepreneurial Society. https://doi.org/10.4337/9781783476923.00014
  7. Bensaid, B., Grine, F., Nor, M. R. M., & Yusoff, M. Y. Z. M. (2013). Enduring financial debt: An islamic perspective. Middle East Journal of Scientific Research, 13(2), 162–170. https://doi.org/10.5829/idosi.mejsr.2013.13.2.1790
  8. Bergh, D. D., & Gibbons, P. (2011). The Stock Market Reaction to the Hiring of Management Consultants: A Signalling Theory Approach. Journal of Management Studies. https://doi.org/10.1111/j.1467-6486.2010.00957.x
  9. Bernhardt, K. L., Donthu, N., & Kennett, P. A. (2000). A longitudinal analysis of satisfaction and profitability. Journal of Business Research. https://doi.org/10.1016/S0148-2963(98)00042-3
  10. Betermier, S., Calvet, L. E., & Sodini, P. (2017). Who Are the Value and Growth Investors? Journal of Finance. https://doi.org/10.1111/jofi.12473
  11. Bodie, Z., Kane, A., & Marcus, A. J. (2018). Investments (Eleventh). McGraw Hill Education.
  12. Clarkson, P., Hanna, J. D., Richardson, G. D., & Thompson, R. (2011). The impact of IFRS adoption on the value relevance of book value and earnings. Journal of Contemporary Accounting and Economics. https://doi.org/10.1016/j.jcae.2011.03.001
  13. Dwi Ayu Parmitasari, R., & . H. (2017). Pengaruh Profitabilitas, Likuiditas, Leverage, dan Ukuran Perusahaan Terhadap Kebijakan Dividen Saham-saham yang Terdaftar pada Jakarta Islamic Index (JII) Periode Tahun 2011-2015. Jurnal Minds: Manajemen Ide Dan Inspirasi. https://doi.org/10.24252/minds.v4i2.4121
  14. Erragraguy, E., & Revelli, C. (2015). Should Islamic investors consider SRI criteria in their investment strategies? Finance Research Letters. https://doi.org/10.1016/j.frl.2015.07.003
  15. Fama, E. F., & French, K. R. (2002). Testing Trade-Off and Pecking Order Predictions About Dividends and Debt. Review of Financial Studies, 15(1), 1–33. https://doi.org/10.1093/rfs/15.1.1
  16. Fatmawati, D., Ariffin, N. M., Abidin, N. H. Z., & Osman, A. Z. (2020). Shariah governance in Islamic banks: Practices, practitioners and praxis. Global Finance Journal. https://doi.org/10.1016/j.gfj.2020.100555
  17. Frank, M. Z., & Goyal, V. K. (2007). Trade-Off and Pecking Order Theories of Debt. In Handbook of Empirical Corporate Finance SET. https://doi.org/10.1016/B978-0-444-53265-7.50004-4
  18. Frennea, C., Han, K., & Mittal, V. (2019). Value appropriation and firm shareholder value: Role of advertising and receivables management. Journal of Marketing Research. https://doi.org/10.1177/0022243718822506
  19. Halal, W. E. (2001). The Collaborative Enterprise. A Stakeholder Model Uniting Profitability and Responsibility. Journal of Corporate Citizenship, 27–42. http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=31E426E78219FD00031CE32ADF6BCCF3?doi=10.1.1.612.4034&rep=rep1&type=pdf
  20. Harrison, J. S., & Wicks, A. C. (2013). Stakeholder Theory, Value, and Firm Performance. Business Ethics Quarterly, 23(1), 97–124. https://doi.org/10.5840/beq20132314
  21. Hennessy, C. A., & Whited, T. M. (2005). Debt dynamics. Journal of Finance, 60(3), 1129–1165. https://doi.org/10.1111/j.1540-6261.2005.00758.x
  22. Hirdinis, M. (2019). Capital structure and firm size on firm value moderated by profitability. International Journal of Economics and Business Administration. https://doi.org/10.35808/ijeba/204
  23. Hosen, M. N., & Rahmawati, R. (2016). Efficiency and Profitability in The Indonesian Islamic Banking Industry. Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah, 8(1). https://doi.org/10.15408/aiq.v8i1.2507
  24. Hovakimian, A., Opler, T., & Titman, S. (2001). The Debt-Equity Choice. The Journal of Financial and Quantitative Analysis, 36(1), 1. https://doi.org/10.2307/2676195
  25. Huang, R., Tan, K. J. K., & Faff, R. W. (2016). CEO overconfidence and corporate debt maturity. Journal of Corporate Finance. https://doi.org/10.1016/j.jcorpfin.2015.10.009
  26. Imam, P., & Kpodar, K. (2016). Islamic banking: Good for growth? Economic Modelling. https://doi.org/10.1016/j.econmod.2016.08.004
  27. Korniotis, G. M., & Kumar, A. (2011). Do older investors make better investment decisions? Review of Economics and Statistics. https://doi.org/10.1162/REST_a_00053
  28. Kurniansyah, F., Saraswati, E., & Rahman, A. F. (2021). Corporate Governance, Profitability, Media Exposure, and Firm Value: the Mediation Role of Environmental Disclosure. Jurnal Minds: Manajemen Ide Dan Inspirasi, 8(1), 69. https://doi.org/10.24252/minds.v8i1.20823
  29. Larasati, D., & Asrori, A. (2020). The Effect of Corporate Governance Mechanisms, Capital Structure and Firm Size on Risk Management Disclosure. Accounting Analysis Journal, 9(1). https://doi.org/10.15294/aaj.v9i1.20956
  30. LeBaron, G. (2014). Reconceptualizing Debt Bondage: Debt as a Class-Based Form of Labor Discipline. Critical Sociology, 40(5), 763–780. https://doi.org/10.1177/0896920513512695
  31. Lee, D. Y., & Tsang, E. W. K. (2001). The Effects of Entrepreneurial Personality, Background and Network Activities on Venture Growth. Journal of Management Studies, 38(4), 583–602.
  32. Li, J., Pike, R., & Haniffa, R. (2008). Intellectual capital disclosure and corporate governance structure in UK firms. Accounting and Business Research. https://doi.org/10.1080/00014788.2008.9663326
  33. Liu, G., & Zhang, C. (2020). Does financial structure matter for economic growth in China. China Economic Review, 61, 101194. https://doi.org/https://doi.org/10.1016/j.chieco.2018.06.006
  34. Lo, C. W., & Leow, C. S. (2014). Islamic Banking in Malaysia: A Sustainable Growth of the Consumer Market. International Journal of Trade, Economics and Finance. https://doi.org/10.7763/ijtef.2014.v5.427
  35. McCann, P., & Ortega-Argilés, R. (2015). Smart Specialization, Regional Growth and Applications to European Union Cohesion Policy. Regional Studies, 49(8), 1291–1302. https://doi.org/10.1080/00343404.2013.799769
  36. McConaughy, D. L., Matthews, C. H., & Fialko, A. S. (2001). Founding family controlled firms: Performance, risk, and value. Journal of Small Business Management. https://doi.org/10.1111/0447-2778.00004
  37. Muchlis, M. (2022). Disclosure of Islamic Values and Their Impact on Third-Party Funds and Islamic Bank Financing. Jurnal Minds: Manajemen Ide Dan Inspirasi, 9(2), 239–252. https://doi.org/10.24252/minds.v9i2.29378
  38. Niu, S., Ding, Y., Niu, Y., Li, Y., & Luo, G. (2011). Economic growth, energy conservation and emissions reduction: A comparative analysis based on panel data for 8 Asian-Pacific countries. Energy Policy, 39(4), 2121–2131. https://doi.org/10.1016/j.enpol.2011.02.003
  39. Pikulina, E., Renneboog, L., & Tobler, P. N. (2017). Overconfidence and investment: An experimental approach. Journal of Corporate Finance. https://doi.org/10.1016/j.jcorpfin.2017.01.002
  40. Prasetya, R. A., & Yulianto, A. (2018). The Effects of Tax Avoidance, Accrual Earnings Management, Real Earnings Management, and Capital Intensity on the Cost of Equity. Jurnal Dinamika Akuntansi, 10(1), 71–81. https://doi.org/10.15294/jda.v10i1.12653
  41. Rosiana, R., Syihabudin, S., & Nurmeilani, S. (2019). The Influence of Profit Sharing Financing, Murabaha Financing, Non-Performing Financing, Inflation and Exchange Rates on Profitability of Sharia Commercial Banks in Indonesia. Syi`ar Iqtishadi : Journal of Islamic Economics, Finance and Banking. https://doi.org/10.35448/jiec.v3i1.5520
  42. Shah Khan, M. M., Ejaz, F., & Aslam, E. (2014). Determinants of Profitability of Islamic Banking Industry: An Evidence from Pakistan. Business & Economic Review, 6(2). https://doi.org/10.22547/ber/6.2.2
  43. Singh, H. P., Kumar, S., & Colombage, S. (2017). Working capital management and firm profitability: a meta-analysis. Qualitative Research in Financial Markets, 9(1), 34–47. https://doi.org/10.1108/QRFM-06-2016-0018
  44. Wahab, A., Abbas, N., Syariati, A., & Syariati, N. E. (2020). The Trickle-Down Effect of Intellectual Capital on Banks’ MacroPerformance in Indonesia. Journal of Asian Finance, Economics and Business, 7(12), 703–710. https://doi.org/10.13106/JAFEB.2020.VOL7.NO12.703
  45. White, G., Lee, A., Yuningsih, Y., Nielsen, C., & Bukh, P. N. (2010). The nature and extent of voluntary intellectual capital disclosures by Australian and UK biotechnology companies. Journal of Intellectual Capital, 11(4), 519–536. https://doi.org/10.1108/14691931011085669
  46. Widarjono, A. (2018). Estimating Profitability of Islamic Banking in Indonesia. Jurnal Keuangan Dan Perbankan, 22(3). https://doi.org/10.26905/jkdp.v22i3.2197
  47. Widarjono, A., Anto, M. B. H., & Fakhrunnas, F. (2020). Financing risk in Indonesian Islamic rural banks: Do financing products matter? Journal of Asian Finance, Economics and Business. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.305
  48. Wieczorek-Kosmala, M. (2021). COVID-19 impact on the hospitality industry: Exploratory study of financial-slack-driven risk preparedness. International Journal of Hospitality Management, 94. https://doi.org/10.1016/j.ijhm.2020.102799
Read More
Author biographies is not available.
Download
PDF
Statistic
Read Counter : 0 Download : 0