The Effect of Companies’ Excellence and Limitations Factors on the Investment Opportunity Set: Agency Theory Approach

Khoirul Hikmah; Prof. Dr. Tulus Haryono; Dr. Djuminah

The Effect of Companies’ Excellence and Limitations Factors on the Investment Opportunity Set: Agency Theory Approach

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African Journal of Accounting and Financial Research

Vol. 2Issue 12019pp. 11–30Published 25 May 2019

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Abstract:

This study aims to analyze the influence of factors of excellence and company limitations on the Investment Opportunity Set (IOS). The research population is all go public companies listed on the Indonesia Stock Exchange (IDX) in 2008-2016. The sampling technique uses a purposive sampling method. The data processing uses regression equations with a panel data models and it is analyzed by an analytical confirmatory factor analysis and eviews. The researchers develop the use of IOS proxy by using 8 variables, namely MVABVA, MVEBVE, PER, CAPBVA, CAPBVE, Tobins'Q, PPEFVA, INS. The 3 variables of the companies’ advantages of the company are multinationality, size and profitability, while the 2 variables of the companies’ limitations are leverage and systematic risk. The results of the study indicate that companies’ multinationality has a positive effect on IOS, the research hypothesis is not supported. The size of the company has a positive effect on IOS, the research hypothesis is not supported. The profitability has a positive effect on IOS, the research hypotheses is supported. The companies’ leverage has a negative effect on IOS, the research hypothesis is supported. The companies’ systematic risk has a negative effect on IOS, the research hypotheses is supported.

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