Financial Performance and Firm Value: A Mediating Role of Profitability

Abstract

Firm value reflects the performance and prosperity of the company through the share prices – the higher the stock price of a company so, the higher value of the company. The firm value is the result of the influence of many factors. This study aims to analyze the cash turnover, receivables turnover and inventory turnover as factors affecting the firm value, considering profitability as a mediating variable. The sample for this study is 10 food and beverage subsector companies listed on the Indonesia Stock Exchange. This study is quantitative descriptive research. For analysis, the authors use quantitative secondary data, i.e. data obtained not directly from the object or research subject. Such data is information from financial reports of food and beverage sub-sector companies publicly available on the idx.co.id website and companies' websites for 2012-2021. The study's analytical model is Structural Equation Modeling with Partial Least Square (SEM-PLS). The results of this study showed that the factors selected by the authors, such as cash turnover, receivable turnover, and inventory turnover, do not significantly influence profitability in IDX-listed food and beverage sub-sector companies for 2012-2021. The situation with firm value is somewhat different. In particular, inventory turnover positively and significantly influences firm value in IDX-listed food and beverage sub-sector companies for 2012-2021. However, the impact of cash and receivable turnover on firm value is negative. At the same time, profitability negatively and significantly influences firm value in IDX-listed food and beverage sub-sector companies for 2012-2021. However, profitability does not mediate the influence of cash turnover, receivable turnover, and inventory turnover on firm value in food and beverage sub-sector companies. Thus, investors who invest solely to obtain dividends should consider other variables than those analyzed in this study.