Financial Decisions on Firm Value with Profitability: A Study on the Property and Real Estate Sector in the Indonesia Stock Exchange

Abstrak

This study aimed to examine the effect of investment decisions, financing decisions, and dividend policy on firm value, with profitability as a mediating variable, in property and real estate companies listed on the Indonesia Stock Exchange (IDX) during 2018–2024. A quantitative approach was employed using secondary data obtained from companies’ annual financial statements. The population consisted of all IDX-listed companies, while the sample was selected through purposive sampling, focusing on property and real estate companies that met specific criteria. The analysis techniques included multiple linear regression and the Sobel test to examine the mediating effect. The results indicated that investment decisions had a positive but insignificant effect on firm value, financing decisions did not significantly affect firm value, and dividend policy had a negative but insignificant effect on firm value. Profitability was found to mediate the effect of investment and financing decisions on firm value, where higher profitability led to a greater potential increase in firm value. Theoretically, this study contributes to Signaling Theory by demonstrating that investment and financing decisions affected firm value through profitability as a mediating variable. The research enhanced understanding of the mediating mechanism between financial decisions and firm value and provided opportunities for further theoretical development, particularly in the property and real estate sector. From a practical perspective, the findings offered guidance for managers in the property and real estate sector to develop more effective investment, financing, and dividend policy strategies. Companies were advised to prioritize profitability in enhancing firm value by focusing on operational efficiency and asset management to maximize returns on investment. Furthermore, dividend policies should be balanced with long-term growth objectives to create sustainable value for shareholders and support company development. Future researchers were encouraged to include additional variables and expand the sample to other industry sectors.