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Evaluated effect of financial performance on firm value: An empirical study of trade sector companies listed on the Indonesia stock exchange (IDX) during the 2021-2023 period

Lilis Maryanti Andhika Hardika Suji Saleh
Abstract

The relevance of the study was based on the increasing need to understand how key financial indicators influenced investor perceptions and market valuation of companies under dynamic economic conditions. The purpose of the study was to determine the contributions of profitability, liquidity, and leverage to firm value in trading sector companies listed on the Indonesia Stock Exchange (IDX) during the 2021-2023 period. This study used panel data regression with EViews 13.0 and a causal descriptive design to analyse 55 trading companies (2021-2023) selected via purposive sampling; applying hypothesis testing and the Random Effect Model (REM). It was shown through the research that both profitability and liquidity exert a significantly positive influence on firm value. Typically, improvements in these indicators lead to an increase in the company’s value, whereas declines may result in a reduction. On the other hand, leverage was found to have no statistically significant effect on firm value, suggesting that variations in debt levels do not necessarily correspond to changes in the company’s market valuation. Specifically, every 1% increase in Return on Equity (ROE) raises the Price to Book Value (PBV) by 0.009 units, while a one-unit increase in the Current Ratio (CR) increases PBV by 0.360. Conversely, the Debt-to-Equity Ratio (DER) has a minimal negative coefficient of -0.0000823, but this effect was not significant in the model. This study provided practical insights for enhancing firm value through improved profitability, liquidity, financial governance, and comprehensive financial analysis beyond leverage

Keywords

price to book value; return on equity; current ratio; debt to equity ratio; leverage

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Received 20.06.2025, Revised 19.11.2025, Accepted 23.12.2025 Published 29.12.2025

Retrieved from Vol. 12, No. 2, 2025

Suggested citation

Maryanti, L., Hardika, A., & Saleh, S. (2025). Evaluated effect of financial performance on firm value: An empirical study of trade sector companies listed on the Indonesia stock exchange (IDX) during the 2021-2023 period. Economics, Entrepreneurship, Management, 12(2), 8-17. https://doi.org/10.56318/eem2025.02.008

https://doi.org/10.56318/eem2025.02.008

Pages 8-17

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