Does profitability play a role in mediating the determinants of firm value?

Abstract

This study aims to examine the role of profitability in mediating the determinants of firm value. The determinants of firm value identified in this study are GCG and CSR. Design/methodology/approach with the population in this study are manufacturing companies listed on the IDX for the period 2019-2023. This study uses unbalanced panel data. By using the Slovin formula, the research sample consists of 290 observations (290 firm-years). The sample was selected randomly using stratified random sampling. Data were analyzed using path analysis. The results show that institutional ownership has a positive effect on profitability, while independent commissioners, audit committees, and CSR do not affect profitability. Furthermore, audit committees and profitability have a positive effect on firm value, while independent commissioners, institutional ownership, and CSR do not affect firm value. Profitability can only mediate the effect of institutional ownership on firm value. Research limitations or implications: The researcher only studied manufacturing companies listed on the IDX, so the results cannot be generalized to all companies listed on the IDX. Practical implications: One of the efforts that can be done by managers to increase the value of the company is by increasing profitability. Increasing institutional ownership is one alternative that can be done by managers to increase profitability.