Modeling Firm Value on Infrastructure, Utility, and Transportation Companies

Abstract

Purpose: This study aims to model the effect of liquidity, leverage, profitability, and firm size on firm value in infrastructure, utilities, and transportation companies listed on the Indonesia Stock Exchange in 2018-2021.   Theoretical Framework: Based on signal theory (Spence, 1973), companies usually try to give signals through positive information in their financial reports to potential investors. This positive signal is expected to provide positive feedback from the company. According to Rizqia & Sumiati (2013), a positive signal from the company is expected to provide positive benefits for the company so that it can provide high value for the company.   Design/Methodology/Approach: This research was a quantitative approach involving 43 infrastructure, utility, and transportation companies listed on the Indonesia Stock Exchange from 2018 to 2021. The data were analysed with a data panel regression.   Findings: The results of this study indicate: (1) Liquidity has no effect on firm value. (2) Leverage has no effect on firm value. (3) Profitability affects firm value. (4) Firm size has no effect on firm value. (5) Liquidity, leverage, profitability, and firm size simultaneously affect firm value.   Research, Practical & Social Implications: The reserch findings imply that in modeling firms’ value, investors as researchers are recommended to use a careful consideration and fit factors.   Originality/Value: The results confirm the previous research that liquidity, leverage, and size have no effect on firm’s value but profitability. Nevertheless, it is recommended to the future reseach to employ a bigger sample size and consider any controlling or mediating variables affecting firms’s value.