The Effect of Profitability and Leverage on Firm Value with Dividend Policy as Moderating Variable: Cases on Lq-45 Listed Company

Abstract

The main purpose of a company is to maximize the investors’ prosperity, which can be reached by maximizing the firm value. However, a company sometimes fails to increase the firm value, which one of the causes is the company’s inaccuracy in applying factors that affect the company’s value. It leads to poor company performance in the point of view of investors. The aims of this research are to proof and to analyze the influence of profitability, leverage, and size of company towards the firm value. Additionally, it also aims to proof and to analyze the dividend policy, that is able to moderate the correlation between profitability and leverage towards the firm value. The population of this study is several companies listed in the LQ45 index on the Indonesia Stock Exchange. The sampling technique used was purposive sampling method, which amounted to 25 companies so that the panel data produced was 75 samples. Data analysis method was descriptive analysis with Eviews tool. The results showed that profitability and leverage had a positive and significant effect on the company’s value. Dividend policy is able to moderate the effects of profitability and leverage on the company’s value. Meanwhile, the company size as a control variable has a negative and not significant effect on the firm value.