Abstract:
Buying stock in the capital market recently has become quite attractive option to invest money. Investing in the stock market is considered more profitable than the make a deposit in the bank. Investors will choose a company that has bigger value to invest their money. The most common way to value is using the stock price. Value of company is important, because the higher value of the company will be followed by high prosperity of shareholders. And one of the
main objectives of the company is increasing the shareholder’s welfare. Many
ways can be done in order increasing the value of company, such as processing of debt and increase profitability.
The purpose of this research is to analyze the effect of leveraging which is measured by Debt to Equity ratio, and profitability that measured by Return on Equity ratio and Earnings per Share ratio towards the value of company which is measured by Market to Book Value Ratio. The research used a purposive sampling method. Samples in this research are LQ 45 index company in Indonesian Stock Exchange, period 2011 until 2013. The data is taken from the company’s financial statement. This research used descriptive statistic, classical assumption, and hypothesis testing using path analysis model.
The result of the research shows that financial leverage has significant negative effect to value of the company, Return on Equity has significant positive effect to value of company, and Earnings per Share has significant negative effect to the company.
