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PURPOSE
THE purpose of this study is to investigate the effect of financial structure, financial leverage, and profitability on industrial company's value as a long term strategic analysis that helps the analyst in predicting future company's value on the light of the mentioned variables in addition to external environment.
Design/Methodology/Approach: A sample was selected from Saudi industrial companies listed in Saudi Stock Market amounting Forty-six companies. The study used the brochures issued by Saudi capital market for four years during the period of 2009-2012.
Findings: The results confirm that there is statistically significant direct relationship between two independent variables: return on equity and capital structure and the dependent variable represented by stock market price. However, there is weak and inverse relationship between financial leverage and stock value, and this relationship is not significant, so there is no statistically significant relationship between financial leverage and company's value.
Research Limitations/Implications: This research examined the effect of financial structure, financial leverage, and profitability on industrial company's value. However, this study did not explore the other factors that affect company's value. This is considered as study limitation.
Practical implications: The results indicate that companies 'management have to pay attention to financing aspects represented by differentiation between different financing sources, and in particular investment debt funds in turn exceeds capital cost, which leads to increase and improve profitability, which have a positive impact in increasing the company value.
Originality/Value: This study will enable management of companie to have a better understanding of the impact of profitability and, which will lead to increased and improved company's values in order to increase shareholders' wealth.
Key Words: Financial Leverage, Financial Structure, Profitability, Stock Market Value, Company?s Value.
Introduction
The primary objective of published financial statements is to provide interested parties with necessary and useful information for decision-taking. The company?s published analysis of financial statements in the current period and prior periods are considered as best method to estimate company?s future performance and assessment of its situation. The development that accompanied financial analysis upon the emergence of strategic analysis is considered one of the best methods to measure all company?s aspects, since analyst can measure all aspects of company?s performance. He can after results evaluation extract valuable information about the effectiveness of...