The purpose of this study is to review the empirical literatures to identify and analyze the variables that are the main determinants of firm value. The most frequently studied variables include profitability, capital structure (leverage), liquidity, firm size, firm age, dividend policy, corporate social responsibility (CSR), and digital transformation. Empirical evidence shows that profitability generally has a positive effect on firm value, both directly and through the mediating role of other variables such as capital structure. However, several studies also find a negative effect of profitability related to factors such as high costs or suboptimal asset management, which can reduce firm value. Capital structure has a conditional role influenced by profitability and firm size. Meanwhile, liquidity shows a variable effect, with several studies indicating a negative impact on firm value. This is because excessive liquidity can indicate underutilized current assets, incurring high investment opportunity costs, and is perceived as a signal of inefficiency by investors. Firm size and age serve as moderating factors that strengthen the relationship between financial variables and firm value. Furthermore, the implementation of CSR and digital transformation has been shown to be important factors in increasing firm value through improved reputation, transparency, and operational efficiency. This study emphasizes the importance of a holistic approach that integrates financial and non-financial factors to maximize firm value in the context of modern and sustainable business competition. Consequently, further research can further explore the complex mechanisms behind the varying effects of profitability and liquidity variables, as well as the synergistic interactions between these determinants across various industry contexts.
Sunarso et al. (Tue,) studied this question.
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