Firm value reflects investors’ perceptions of a company’s performance and long-term prospects, making it a critical factor in financial decision-making. This study examines the direct and indirect effects of profitability, leverage, and liquidity on firm value, with dividend policy as a mediating variable, in financial services companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. Using a quantitative approach, data from 28 purposively selected companies were analyzed through Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that profitability, leverage, and liquidity each have a positive and significant effect on firm value, with profitability emerging as the most influential factor. Profitability also positively affects dividend policy, while leverage and liquidity have negative effects. Furthermore, dividend policy has a significant negative impact on firm value, suggesting that higher dividend payouts tend to lower firm value. Mediation tests show that dividend policy only weakly mediates the relationship between the three financial indicators and firm value. The results indicate that investors prioritize growth potential over high dividend distributions. This study highlights the importance for firms to enhance profitability and design balanced dividend policies aligned with internal conditions and investor expectations to optimize firm value.
Nanut et al. (Fri,) studied this question.
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