Analysis Of Capital Structure Related To EVA (ECONOMIC VALUE ADDED) A Case Study In Mining Sector Companies At Indonesia Stock Exchange

• Main Author: MARIS YAPPY (NIM: 29106328), STELLA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/12672
• Institution: Institut Teknologi Bandung

Profit, growth and the increasing of wealth in a company in the future become a company's short&#8208;term and long&#8208;term goals as well as the investors' expectations. The company which is able and succeeds in creating values within the company has proved that the company can deliver values to both its shareholders and stakeholders, so that the company might create positive image and good reputation among the investors. Of course, the investors are not only interested in a company that can earn profit but also it can create economic value&#8208;added.<p>Economic Value Added (EVA) is one of financial methods to measure the wealth of a company. This method measures the company performance in creating economic value&#8208;added for its shareholders (investors). In the portfolio theory, there is an assumption that the rational investors are not willing to take more risks if there is no increasing benefit (return) as they expect in return. Therefore, a company must be able to earn profit and at the same time deliver economic valueadded as well.<p>The formulation of capital structure strategy in a company by the company's top management is very influential to the success of profit earning which it will continue to the achievement of economic value&#8208;added. The ideal capital structure requires minimum cost of capital and can achieve maximum EVA as well. This research focused on how the capital structure affects to EVA in mining sector companies in Indonesia.<p>The research resulted that most of listed mining sector companies at Indonesia Stock Exchange destroyed values instead of created EVA for their shareholders during year 2000 until 2007. NOPAT (Net Operating Profit After Tax) is one of the factors which influences most the changes of EVA. The higher NOPAT, the higher achievement of EVA (towards the positive EVA). In contrast, a company which has negative NOPAT means a company is unable to create economic value&#8208;added for its shareholders (means destroying values). The research also showed that cost of equity and equity weight has affected the achievement of EVA rather than cost of debt and debt weight.