Capital Structure, Investment Decisions, and Firm Value under Investment Loan Rate Conditions Evidence from Indonesian Property and Real Estate Firms

Abstract

This study examines the associations of capital structure and realized investment intensity with firm value and whether interest rates on investment loans condition those relationships in Indonesian property and real estate firms. Annual data for 2015–2025 are estimated using cross-section fixed effects with firm-clustered robust standard errors. The primary balanced panel consists of 29 firms and 319 firm-year observations. Capital structure, measured by the debt-to-equity ratio, is positively associated with Tobin’s Q, whereas realized investment intensity is negatively associated with firm value. The capital-structure interaction with investment loan rates is positive and significant in the primary model, while the investment interaction is positive rather than negative as hypothesized. A 33-firm full-sample sensitivity model preserves the direct effects but renders both interactions nonsignificant, indicating that moderation results are sample-sensitive. For property developers, the findings favor disciplined debt-capacity management and selective staging of capital additions when borrowing costs are high and cash-conversion timing is uncertain. For investors, leverage and realized investment intensity should be evaluated together with project progress, financing capacity, and expected cash conversion rather than as stand-alone valuation signals.