An Analysis of Profitabilitas and Firm Size on Firm Value in the Indonesia Banking Sector Listed on the Indonesia Stock Exchage (IDX) in 2023

Abstrak

This study aims to analyse the influence of Profitability and Firm Size on Firm Value in Banking Companies Listed on the Indonesia Stock Exchange (IDX) in 2023. Profitability is measured using Return on Assets (ROA), while Firm Size is measured using the natural logarithm of total assets. Firm Value is measured using Price to Book Value (PBV). The study's data comprises 43 banking companies selected through purposive sampling. The analysis was conducted using multiple linear regression. The results show that Profitability has a positive and significant effect on Firm Value, consistent with the Signalling Theory, which states that Profitability provides a positive signal to investors regarding the company's financial prospects. Firm Size has a negative but insignificant effect on Firm Value, which can be explained by potential operational inefficiencies in large companies, as stated in the Economies of Scale Theory. Simultaneously, Profitability and Firm Size significantly affect Firm Value, although the model only explains 18.06% of the variation in Firm Value. This study highlights the importance of Profitability as the main factor in increasing Firm Value, while the role of Firm Size requires further evaluation.