THE ROLE OF FINANCIAL PERFORMANCE AND DETERMINANTS OF CORPORATE VALUE IN BANKING COMPANIES LISTED ON THE INDONESIAN STOCK EXCHANGE

Abstrak

Firm value represents the market’s perception of a bank’s ability to generate sustainable economic value. The economic crisis of 1998 and the lingering effects of the 2008 global financial crisis exerted a significant adverse impact upon firm value, particularly within the banking sector. These dynamic economic changes demand a thorough understanding of the factors influencing firm value; this study therefore re-examines the determinants of firm value within the Indonesian banking sector. This study employs a quantitative approach using secondary data comprising the annual financial reports of banking companies listed on the Indonesia Stock Exchange over the period 2015–2024, together with national inflation data. Purposive sampling against criteria of continuous listing, uninterrupted profitability, and uninterrupted dividend distribution yielded six banks (BBCA, BBNI, BBRI, BMRI, BDMN, and MEGA), giving 60 firm-year observations. The analysis was conducted using partial least squares structural equation modelling (SEM-PLS) through the stages of measurement model and structural model testing, including tests of direct, indirect (mediating), and moderating effects. The results indicate that financial performance exerts a positive and significant effect upon firm value and serves as the principal axis of value creation. Third-party funds exert a positive effect upon financial performance but exert no direct effect upon firm value; their effect upon firm value occurs indirectly through financial performance (full mediation). Inflationary pressure exerts a significant negative effect upon financial performance and no direct effect upon firm value, yet exerts an indirect effect through financial performance (full mediation). Dividend policy exerts a significant negative effect upon firm value, yet exerts no effect upon financial performance and is not mediated by it. Furthermore, information technology innovation significantly moderates (pure moderation) the relationship between third-party funds and firm value, but does not moderate the relationship between financial performance and firm value. Practically, these findings indicate that bank executives should treat profitability, rather than the volume of deposits mobilised or the size of the dividend distributed, as the primary lever of market valuation, and should weigh dividend payouts against the retained earnings required to fund digital infrastructure. For the Financial Services Authority (OJK) and Bank Indonesia, supervision directed at the quality of profitability and incentives for banking digitalisation emerge as more effective instruments for safeguarding market confidence than the regulation of dividend distribution alone. Since the sample is confined to six large-capitalisation banks, these implications apply primarily to that segment.

Kata kunci

• Dividend Policy
• Financial performance
• Information Technology Innovation
• Macroeconomic Factors
• company value
• third party funds