EFFECT OF CEO ABILITY, CEO OWNERSHIP AND PROFITABILITY ON CORPORATE VALUE MEDIATED BY CAPITAL STRUCTURE

This study aims to test and analyze the effect of CEO ability and CEO ownership as a determinant factor of capital structure and corporate value to build an integrated theoretical model with profitability. The development of theoretical model is conducted to test and analyze: (1) CEO ability with the proxy of (MJC) and education level (TPC); (2) CEO ownership with the proxy of CEO share ownership (CEOO); (3) projected profitability return on assets (ROA), return on investment (ROI), return on equity (ROE) and return on sales (ROS); profitability on firm value with the proxy of market book value (MBV) and Tobin's Q with capital structure as a mediation variable with the proxy of long term debt to equity (LTDE), long term debt to total assets (LTDA) and total debt to total assets (TDTA ). It is developed by integrating aspects outside the accounting database, i.e. CEO ability to know the role of tenure and CEO education level on the capital structure decision to increase the firm value. The findings show CEO ability does not determine the capital structure, but directly affect on firm value, CEO ownership affect on decreasing capital structure and corporate value, Profitability improves capital structure and corporate value. Higher debt in capital structure improves firm value. The research develops the theory of capital structure namely trade-off theory, Pecking order theory, Signaling theory and Agency theory for determinants factors of capital structure and corporate value from CEO's finance behavior.