Islamic social reporting mediates the effect of profitability and leverage on firm value

Abstract

This study examines the effects of profitability, leverage, and Islamic social reporting (ISR) on firm value. This study uses explanatory research with a quantitative approach. The population in this study is all companies from the basic and chemical industry sectors listed on the Indonesian Syariah Stock Index in consecutive years reporting financial statements for 2017–2021. Saturated sampling is selected as the sampling method, and documentation is used to collect data. The data were analyzed using path analysis with the help of IBM-SPPS-21. The results showed that profitability significantly affects firm value, while leverage does not significantly affect firm value. Profitability significantly affects ISR reporting, whereas influence does not affect ISR reporting. ISR reporting can increase the value of a company. ISR reporting can mediate the relationship between profitability and firm value. However, ISR reporting cannot mediate the impact of leverage on firm value. The findings of this study suggest that to maximize returns, it is necessary to pay attention to the company's profitability, the proportion of leverage used, and the company's ISR reporting.