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Does Dividend Policy Mediate the Relationship Between Financial Performance and Company Value?

Author

Listed:
  • Steward Gani

    (Universitas Prima Indonesia, Medan, Indonesia)

  • Rasinta Ria Ginting

    (Universitas Prima Indonesia, Medan, Indonesia)

  • Enda Noviyanti Simorangkir

    (Universitas Prima Indonesia, Medan, Indonesia)

Abstract

The impact of financial performance and dividend policy on company value is the subject of numerous studies in corporate finance, although the findings are still conflicting. Therefore, this study aims to analyze factors affecting the company values of manufacturing companies listed on the Indonesia Stock Exchange. The sample of this study is 31 manufacturing companies that were listed on the Indonesian Stock Exchange (IDX) in 2016-2020. This study uses quantitative secondary data, particularly financial reports published by manufacturing companies on the Indonesian Stock Exchange (IDX) website (https://www.idx.co.id/). Structural Equation Modeling with Partial Least Square (SEM-PLS) is the analytical model used in this study. The independent variables in this study are Liquidity (X1) (represented by the Current Ratio (CR)), Leverage (X2) (represented by the Debt to Equity Ratio (DER)), and Profitability (X3) (represented by the Return on Assets (ROA)). The dependent variable in this study is Company Value (Y), represented by the Price-to-Book Value (PBV). The mediating variable in this study is Dividend Policy (Z), represented by the Dividend Payout Ratio (DPR). The results show that liquidity does not affect company value; profitability and leverage have effects on company value with a positive direction; dividend policy does not affect company value; liquidity, leverage, and profitability do not affect dividend policy, and the relationship between liquidity, leverage, and profitability and company value cannot be mediated by dividend policy. This study contributes to the literature by giving a deeper understanding of factors affecting company value. Companies should optimize leverage and maximize profitability to maximize company value.

Suggested Citation

  • Steward Gani & Rasinta Ria Ginting & Enda Noviyanti Simorangkir, 2022. "Does Dividend Policy Mediate the Relationship Between Financial Performance and Company Value?," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 89-100, December.
    • Handle: RePEc:iaf:journl:y:2022:i:4:p:89-100
    DOI: 10.33146/2307-9878-2022-4(98)-89-100
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    References listed on IDEAS

    as
    1. Hasanudin Hasanudin & Andini Nurwulandari & I. Made Adnyana & Novi Loviana, 2020. "The Effect of Ownership and Financial Performance on Firm Value of Oil and Gas Mining Companies in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 103-109.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    liquidity; leverage; profitability; dividend policy; company value;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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