Profitability has a positive and significant influence on company value

Oct 13, 2025 by talynt.org 84 views

The Effect of Profitability, Leverage, and Size on Company Value in Property and Real Estate Companies Listed on the Indonesia Stock Exchange for the Period 2017-2021

Introduction

The property and real estate sector is a significant contributor to the Indonesian economy, with numerous companies listed on the Indonesia Stock Exchange (IDX). Understanding the factors that affect company value in this sector is crucial for investors and company management to make informed decisions. This study examines the effect of profitability, leverage, and company size on company value in the property and real estate sector listed on the IDX during the 2017-2021 period.

Background

The property and real estate sector is a complex and dynamic industry, with various factors influencing company value. Profitability, leverage, and company size are three key factors that have been extensively studied in the context of company value. Profitability reflects a company's ability to generate profits, which in turn affects its attractiveness to investors. Leverage, on the other hand, refers to the use of debt to finance a company's operations, which can impact its risk profile and profitability. Company size, measured by market capitalization or revenue, can also influence company value, as larger companies may have greater access to resources and opportunities.

Methodology

This study employed a purposive sampling method to select 14 companies from the 83 registered companies in the property and real estate sector listed on the IDX. Data analysis was conducted using multiple linear regression through EViews software. The study examined the relationship between profitability, leverage, and company size on company value, using the following variables:

Profitability: measured by return on equity (ROE)
Leverage: measured by debt-to-equity ratio (D/E)
Company size: measured by market capitalization
Company value: measured by market capitalization

Results

The results of this study showed that:

Profitability has a positive and significant influence on company value. This means that the higher the profitability of a company, the higher the value of the company. This can be understood because profitability reflects a company's ability to generate profits, which in turn will increase the company's attractiveness in the eyes of investors.
Leverage, on the other hand, has a negative and insignificant influence on company value. This indicates that an increase in leverage (debt) is not always directly proportional to the increase in company value. Companies with high leverage may be considered risky by investors because large debt burden can burden the profitability of the company in the future.
Company size has a positive and insignificant influence on the company's value. This result shows that the company's size is not a dominant factor in determining the company's value. Although large companies have the potential to access resources and greater opportunities, but this is not always directly proportional to the increase in company value. Other factors such as operational efficiency and appropriate business strategies also play an important role in determining company value.

Implications of the Results

The results of this study have important implications for investors and company management in the property and real estate sector:

Investor: A company with high profitability and low leverage tends to have a higher company value and is more attractive to invest.
Management: Company management needs to focus on increasing healthy profitability and management of leverage to increase company value and attract investors.

Conclusion

This study provides an important perspective on the factors that affect company value in the property and real estate sector in Indonesia. By understanding the effect of profitability, leverage, and company size, company investors and management can make investment decisions and business strategies that are more effective to achieve long-term goals.

Recommendations

Based on the findings of this study, the following recommendations are made:

Investors should focus on companies with high profitability and low leverage.
Company management should prioritize increasing healthy profitability and managing leverage to increase company value.
Further research is needed to examine the impact of other factors, such as operational efficiency and business strategies, on company value in the property and real estate sector.

Limitations

This study has several limitations, including:

The sample size is relatively small, consisting of only 14 companies.
The study only examines the effect of profitability, leverage, and company size on company value, and does not consider other factors that may influence company value.
The study is limited to the property and real estate sector in Indonesia and may not be generalizable to other sectors or countries.

Future Research Directions

Future research should aim to:

Examine the impact of other factors, such as operational efficiency and business strategies, on company value in the property and real estate sector.
Investigate the effect of profitability, leverage, and company size on company value in other sectors and countries.
Develop a more comprehensive model of company value that incorporates multiple factors.

References

Indonesia Stock Exchange. (2022). Annual Report.
EViews. (2022). User Manual.
[Other relevant references can be added here]

Appendix

List of companies included in the study
Data analysis results
Additional tables and figures

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Frequently Asked Questions (FAQs) on the Effect of Profitability, Leverage, and Size on Company Value in Property and Real Estate Companies Listed on the Indonesia Stock Exchange for the Period 2017-2021

Q: What is the main objective of this study?

A: The main objective of this study is to examine the effect of profitability, leverage, and company size on company value in the property and real estate sector listed on the Indonesia Stock Exchange (IDX) during the 2017-2021 period.

Q: What are the key findings of this study?

A: The key findings of this study are:

Profitability has a positive and significant influence on company value.
Leverage has a negative and insignificant influence on company value.
Company size has a positive and insignificant influence on company value.

Q: What are the implications of these findings for investors and company management?

A: The findings of this study have important implications for investors and company management in the property and real estate sector:

Investors should focus on companies with high profitability and low leverage.
Company management should prioritize increasing healthy profitability and managing leverage to increase company value.

Q: What are the limitations of this study?

A: The limitations of this study are:

The sample size is relatively small, consisting of only 14 companies.
The study only examines the effect of profitability, leverage, and company size on company value, and does not consider other factors that may influence company value.
The study is limited to the property and real estate sector in Indonesia and may not be generalizable to other sectors or countries.

Q: What are the recommendations for future research?

A: The recommendations for future research are:

Examine the impact of other factors, such as operational efficiency and business strategies, on company value in the property and real estate sector.
Investigate the effect of profitability, leverage, and company size on company value in other sectors and countries.
Develop a more comprehensive model of company value that incorporates multiple factors.

Q: What are the practical implications of this study for company management?

A: The practical implications of this study for company management are:

Prioritize increasing healthy profitability and managing leverage to increase company value.
Focus on operational efficiency and business strategies to improve company value.
Consider the impact of leverage on company value and adjust debt levels accordingly.

Q: What are the practical implications of this study for investors?

A: The practical implications of this study for investors are:

Focus on companies with high profitability and low leverage.
Consider the impact of leverage on company value and adjust investment decisions accordingly.
Monitor company performance and adjust investment decisions based on changes in profitability and leverage.

Q: What are the implications of this study for policymakers?

A: The implications of this study for policymakers are:

Consider the impact of regulatory policies on company value and adjust policies accordingly.
Encourage companies to prioritize increasing healthy profitability and managing leverage to increase company value.
Develop policies to support the growth of the property and real estate sector in Indonesia.

Q: What are the implications of this study for researchers?

A: The implications of this study for researchers are:

Examine the impact of other factors, such as operational efficiency and business strategies, on company value in the property and real estate sector.
Investigate the effect of profitability, leverage, and company size on company value in other sectors and countries.
Develop a more comprehensive model of company value that incorporates multiple factors.

Q: What are the implications of this study for the property and real estate sector in Indonesia?

A: The implications of this study for the property and real estate sector in Indonesia are:

Encourage companies to prioritize increasing healthy profitability and managing leverage to increase company value.
Support the growth of the property and real estate sector in Indonesia through policies and regulations.
Develop a more comprehensive understanding of the factors that influence company value in the property and real estate sector.

Note: The Q&A article is a continuation of the previous article, and it provides additional information and insights on the topic.