Title: Leverage, firm value and competitive strategy: evidence from Indonesia

Authors: Bambang Hadinugroho; Tulus Haryono; Payamta; Irwan Trinugroho

Addresses: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36 Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36 Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36 Surakarta, 57126, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami 36 Surakarta, 57126, Indonesia

Abstract: We study the agency theory by re-examining the effect of financial leverage on firm value. Moreover, we introduce a contingency variable: firm competitive strategy. To do so, we study non-financial firms listed on the Indonesia Stock Exchange from 2007 through 2013, resulting in 2,438 observations. Using the panel data technique, after controlling for firm-specific characteristics and industry differences, we find that leverage has a positive effect on firm value. Going deeper, we find that this effect is stronger for firms that apply a cost leadership strategy, differentiation strategy, or focused strategy.

Keywords: firm value; financial leverage; competitive strategy; agency theory; Indonesia.

DOI: 10.1504/IJEPEE.2018.094806

International Journal of Economic Policy in Emerging Economies, 2018 Vol.11 No.5, pp.487 - 508

Available online: 12 Sep 2018 *

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