Analysis of the Effect of Profitability and Liquidity on Company Value with Good Corporate Governance as a Moderation Variable in Manufacturing Companies
Introduction
The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a significant number of manufacturing companies listed on it. The value of these companies is influenced by various factors, including profitability, liquidity, and corporate governance. This study aims to analyze the effect of Return On Equity (ROE) and Current Ratio (CR) on company value with Good Corporate Governance (GCG) as a moderation variable in manufacturing companies listed on the IDX.
Literature Review
Previous studies have shown that profitability and liquidity are significant factors in determining company value. ROE is a measure of a company's profitability, while CR is a measure of its liquidity. A high ROE indicates that a company is generating profits efficiently, while a high CR indicates that a company has a good ability to fulfill its short-term obligations. Good corporate governance (GCG) is also an important factor in determining company value, as it creates transparency and accountability, which can increase investor confidence.
Methodology
This study uses multiple linear regression analysis and moderation regression analysis to test the effect of ROE and CR on company value with GCG as a moderation variable. The population consists of 35 manufacturing companies in the consumer goods sector listed on the IDX. The sampling method used is purposive sampling, and based on the specified criteria, the number of samples taken is 13 manufacturing companies.
Results
The results of this study show that partially, ROE has a significant positive influence on company value, as well as CR, which also has a significant positive effect on company value. However, GCG measured by insider ownership cannot significantly moderate the influence of ROE on company value, although it can significantly moderate the effect of CR on company value. The F test results show that simultaneously, ROE and CR are able to affect the value of the company in the consumer goods sector listed on the IDX.
Discussion
The results of this study indicate that profitability measured through ROE plays an important role in determining company value. This shows that the higher the profitability produced by the company, the higher the company's value in the eyes of investors. High ROE reflects the company's efficiency in generating profits from their equity, which in turn can attract investors.
Meanwhile, the liquidity measured by CR also contributes to increasing company value. The high CR shows that the company has a good ability to fulfill its short-term obligations, thus giving more confidence to investors about the stability and financial health of the company. Therefore, investors tend to be more interested in investing in companies that have a good liquidity ratio.
Although GCG has not succeeded in moderating ROE's influence on company value, the role of GCG in moderating CR shows the importance of good corporate governance practices in strengthening investor confidence. A good GCG creates higher transparency and accountability, which has a positive effect on the perception of company value, especially when liquidity shows good potential.
Conclusion
The combination of these results provides a clearer picture of how financial factors can affect the value of the company and the importance of applying GCG in the right context. Therefore, companies need to not only focus on increasing profitability and liquidity, but must also pay attention to the application of GCG principles to achieve optimal company value.
Implications
By understanding this relationship, stakeholders, including company managers and investors, can make better decisions related to the investment and management of companies in the manufacturing industry in Indonesia. This study provides valuable insights for companies, investors, and policymakers to improve the corporate governance practices and financial performance of manufacturing companies listed on the IDX.
Recommendations
Based on the findings of this study, the following recommendations are made:
Companies should focus on increasing profitability and liquidity to improve their value.
Companies should pay attention to the application of GCG principles to achieve optimal company value.
Investors should consider the GCG practices of companies when making investment decisions.
Policymakers should develop and implement policies to improve corporate governance practices in the manufacturing industry.
Limitations
This study has several limitations, including:
The sample size is relatively small, which may limit the generalizability of the findings.
The study only focuses on manufacturing companies listed on the IDX, which may not be representative of all companies in the manufacturing industry.
The study only uses ROE and CR as measures of profitability and liquidity, which may not capture the full range of financial factors that affect company value.
Future Research Directions
Future research should aim to:
Examine the effect of other financial factors, such as debt-to-equity ratio and return on assets, on company value.
Investigate the impact of GCG on company value in other industries, such as service and technology.
Develop and test models that can predict company value based on financial and non-financial factors.
Conclusion
In conclusion, this study provides valuable insights into the effect of profitability and liquidity on company value with GCG as a moderation variable in manufacturing companies listed on the IDX. The findings of this study have important implications for companies, investors, and policymakers, and highlight the need for companies to focus on increasing profitability and liquidity, as well as applying GCG principles to achieve optimal company value.Frequently Asked Questions (FAQs) about the Effect of Profitability and Liquidity on Company Value with Good Corporate Governance
Q: What is the main objective of this study?
A: The main objective of this study is to analyze the effect of Return On Equity (ROE) and Current Ratio (CR) on company value with Good Corporate Governance (GCG) as a moderation variable in manufacturing companies listed on the Indonesia Stock Exchange (IDX).
Q: What are the key findings of this study?
A: The key findings of this study are:
ROE has a significant positive influence on company value.
CR also has a significant positive effect on company value.
GCG measured by insider ownership cannot significantly moderate the influence of ROE on company value, although it can significantly moderate the effect of CR on company value.
Q: What is the significance of this study?
A: This study provides valuable insights into the effect of profitability and liquidity on company value with GCG as a moderation variable in manufacturing companies listed on the IDX. The findings of this study have important implications for companies, investors, and policymakers.
Q: What are the limitations of this study?
A: The limitations of this study are:
The sample size is relatively small, which may limit the generalizability of the findings.
The study only focuses on manufacturing companies listed on the IDX, which may not be representative of all companies in the manufacturing industry.
The study only uses ROE and CR as measures of profitability and liquidity, which may not capture the full range of financial factors that affect company value.
Q: What are the implications of this study for companies?
A: The implications of this study for companies are:
Companies should focus on increasing profitability and liquidity to improve their value.
Companies should pay attention to the application of GCG principles to achieve optimal company value.
Q: What are the implications of this study for investors?
A: The implications of this study for investors are:
Investors should consider the GCG practices of companies when making investment decisions.
Investors should also consider the financial performance of companies, including their profitability and liquidity.
Q: What are the implications of this study for policymakers?
A: The implications of this study for policymakers are:
Policymakers should develop and implement policies to improve corporate governance practices in the manufacturing industry.
Policymakers should also consider the financial performance of companies, including their profitability and liquidity, when making policy decisions.
Q: What are the future research directions based on this study?
A: The future research directions based on this study are:
Examine the effect of other financial factors, such as debt-to-equity ratio and return on assets, on company value.
Investigate the impact of GCG on company value in other industries, such as service and technology.
Develop and test models that can predict company value based on financial and non-financial factors.
Q: What are the practical implications of this study?
A: The practical implications of this study are:
Companies should prioritize the application of GCG principles to improve their corporate governance practices.
Investors should consider the GCG practices of companies when making investment decisions.
Policymakers should develop and implement policies to improve corporate governance practices in the manufacturing industry.
Q: What are the theoretical implications of this study?
A: The theoretical implications of this study are:
The study provides evidence that GCG has a positive effect on company value.
The study also provides evidence that profitability and liquidity are important factors in determining company value.
Q: What are the contributions of this study?
A: The contributions of this study are:
The study provides new insights into the effect of profitability and liquidity on company value with GCG as a moderation variable.
The study also provides evidence that GCG has a positive effect on company value.
Q: What are the limitations of this study in terms of generalizability?
A: The limitations of this study in terms of generalizability are:
The study only focuses on manufacturing companies listed on the IDX, which may not be representative of all companies in the manufacturing industry.
The study only uses ROE and CR as measures of profitability and liquidity, which may not capture the full range of financial factors that affect company value.
Q: What are the limitations of this study in terms of methodology?
A: The limitations of this study in terms of methodology are:
The study uses a relatively small sample size, which may limit the generalizability of the findings.
The study only uses multiple linear regression analysis and moderation regression analysis, which may not capture the full range of relationships between variables.