This study emphasizes on examining the moderating effect of Investment
Opportunity Sets (IOS) in the relation between Capital Expenditures and
Uncertainty of Future Earnings. I estimated that the IOS can mitigate the positive
effect of capital expenditures to Uncertainty of future earnings. Since, the greater
the IOS, the firm will have more option in valuable investments which have more
certain return. Thus, by executing those valuable investments, firm can reduce its
future earnings uncertainty that is caused by the capital investment. This study
also can reveal the investment behavior of Indonesian firms, especially the
manufacturing firms. By using 299 samples which are taken from 80 listed
manufacturing firms from 2006- 2009, it found that the capital expenditures have
positive effect towards the uncertainty of future earnings. Moreover, the IOS is
proven to be able to mitigate that positive effect and make the effect become
negative. Therefore, the manufacturing firms in Indonesia are proven to be able to
execute the valuable opportunity and invest in the prospective investment