ABID concept in the effect of financial policy on firm value

Abstract

The main aim of this research is to test the effect of financial policy on firm value. The research question developed in this research is how the effect of financial policy on firm value by using the concept of ABID? Based on the purpose sampling method there are 26 companies which distribute the dividends successively, so that 26 samples are obtained. Structural equation model with partial least square analysis tool is used to prove empirically the effect of each variables and the hypothesis testing. The findings of the study show that investment decisions have negative effect on dividend policy, but not significant. Investment decisions have significant positive effects on funding decisions and firm value. Dividend policy has significant positive effect on funding decisions and firm value. Funding decisions significantly influence the firm value positively. The results of this study reject the pecking order theory.