Does Financial Performance Matter for Firm Value in Indonesia Banks?
DOI:
https://doi.org/10.55587/ijbe.v1i4.439Kata Kunci:
Capital Adequacy Ratio, Net Interest Margin, Liquid Assets to Total Assets, Firm Value, BanksAbstrak
Purpose: The purpose of this study is to give empirical evidence about the effect of capital adequacy ratio (CAR), liquidity and profitability toward firm value on Indonesian listed banks with special attention to the role of moderation of Net Interest Margin (NIM) in the relationship between CAR and firm value.
Method: This study uses a quantitative method employing panel data regression with Fixed Effects and Random Effects models. The population is the banks listed on the Indonesia Stock Exchange in 2020-2023, while the sample is the selected listed banks that fulfilll the research criteria. Tobin’s Q is used as a measure of firm value, Liquid Assets to Total Assets (LATA) is used as a proxy for liquidity and NIM is used as a measure of profitability
Finding: The results indicate that NIM has a positive and significant effect on firm value, while CAR has no significant effect on firm value. LATA is negatively related to firm value which suggests higher liquidity might be associated with lower operational efficiency. Furthermore, the interaction effect between CAR and NIM is insignificant, suggesting that investors evaluate the capitalisation and profitability separately
Novelty: The novelty of this study lies in examining the moderating role of NIM in the relationship between CAR and firm value within the Indonesian banking sector during the 2020–2023 period, providing evidence on the relative importance of profitability and prudential indicators in explaining bank valuation in an emerging market.
Referensi
Abbas, F., Ali, S., & Ahmad, M. (2023). Does economic growth affect the relationship between banks’ capital, liquidity and profitability: empirical evidence from emerging economies. Journal of Economic and Administrative Sciences, 39(2), 366–381. https://doi.org/10.1108/JEAS-03-2021-0056
Ahmad, N., Shah, F. N., Ijaz, F., & Ghouri, M. N. (2023). Corporate income tax, asset turnover and Tobin’s Q as firm performance in Pakistan: Moderating role of liquidity ratio. Cogent Business & Management, 10(1), 2167287. https://doi.org/10.1080/23311975.2023.2167287%0A
Aiken, L. S., West, S. G., & Reno, R. R. (1991). Multiple regression: Testing and interpreting interactions. sage.
Ali, A. (2022). Sustainability of Financial Soundness of Banks: An Evidence Form Public and Private Sector Banks. International Journal of Sustainable Development and Planning, 17(8), 2463–2473. https://doi.org/10.18280/ijsdp.170814
Alkhazali, O., Helmi, M. H., Mirzaei, A., & Saad, M. (2024). The impact of capital on bank profitability during the COVID-19 pandemic. Global Finance Journal, 62, 100994. https://doi.org/https://doi.org/10.1016/j.gfj.2024.100994
Almaqtari, F. A., Al‐Homaidi, E. A., Tabash, M. I., & Farhan, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance & Economics, 24(1), 168–185. https://doi.org/https://doi.org/10.1002/ijfe.1655
Andrieș, A. M., Cazan, S., & Sprincean, N. (2021). Determinants of Bank M&As in Central and Eastern Europe. Journal of Risk and Financial Management, 14(12), 621. https://doi.org/10.3390/jrfm14120621
Anis, I., Gani, L., Fauzi, H., Hermawan, A. A., & Adhariani, D. (2023). The sustainability awareness of banking institutions in Indonesia, its implication on profitability by the mediating role of operational efficiency. Asian Journal of Accounting Research, 8(4), 356–372. https://doi.org/https://doi.org/10.1108/AJAR-06-2022-0179
Baltagi, B. H. (2021). Dynamic panel data models. In Econometric analysis of panel data (pp. 187–228). Springer. https://doi.org/10.1007/978-3-030-53953-5_8
Bui, T. N., Nguyen, X. H., & Pham, K. T. (2023). The effect of capital structure on firm value: A study of companies listed on the Vietnamese stock market. International Journal of Financial Studies, 11(3), 100. https://doi.org/https://doi.org/10.3390/ijfs11030100
Butt, M. N., Baig, A. S., & Seyyed, F. J. (2023). Tobin’s Q approximation as a metric of firm performance: an empirical evaluation. Journal of Strategic Marketing, 31(3), 532–548. doi:10.1080/0965254X.2021.1947875.
Coccorese, P., & Girardone, C. (2021). Bank capital and profitability: Evidence from a global sample. The European Journal of Finance, 27(9), 827–856. https://doi.org/https://doi.org/10.1080/1351847X.2020.1832902
Ebenezer, O. O., Islam, M. A., Yusoff, W. S., & Sobhani, F. A. (2018). Exploring liquidity risk and interest-rate risk: Implications for profitability and firm value in Nigerian banks. Journal of Reviews on Global Economics, 8, 315–326. https://doi.org/10.6000/1929-7092.2019.08.27
Ghazalat, A. (2025). Board characteristics, board committees and voluntary disclosure as a catalyst of investment opportunities. Discover Sustainability, 6(1), 1–21. https://doi.org/10.1007/s43621-025-01434-z
Greene, W. H. (2018). Econometric analysis/Limdep users manual. Retrieved on July, 15, 2022.
Hasan, Z. (2024). The Effect of Current Accounts, Savings and Time Deposits on Banking Credit: A Case Study of Regional Development Banks (RDB) in Indonesia. Journal of International Business, Economics and Entrepreneurship, 9(1), 24–37. https://doi.org/10.24191//jibe.v9i1.900
Hasan, Z. (2025). Bibliometric Analysis of Islamic Banking Publication in the Post-Covid 19 Pandemic Era. Journal of International Business, Economics and Entrepreneurship, 10(1), 33–48. https://doi.org/10.24191/jibe.v10i1.2560
Jagirani, T. S., Lim, C. C., & Kosim, Z. B. (2023a). Determinants of the firm value of listed banks in Pakistan: A panel data approach. Asian Economic and Financial Review, 13(4), 241. https://doi.org/10.55493/5002.v13i4.4764
Jagirani, T. S., Lim, C. C., & Kosim, Z. B. (2023b). Relationship between financial risks and firm value: A moderating role of capital adequacy. Investment Management & Financial Innovations, 20(1), 293. https://doi.org/DOI:10.21511/imfi.20(1).2023.25
Kamran, M. R., Shoaib, T., Mumtaz, R., & Choudhary, A. A. (2022). Bank Diversification, Performance and Cash Holdings: Evidence from Pakistan. Pakistan Journal of Humanities and Social Sciences, 10(3), 1028–1042. https://doi.org/10.52131/pjhss.2022.1003.0266%0A
Kasie, E. G., Onyenwe, N. I., & Rita, N. N. (2023). Non performing loans and profitability of selected deposit money banks in Nigeria (2008-2021). International Journal of Research in Finance and Management, 6(1), 188–196. https://doi.org/10.33545/26175754.2023.v6.i1c.209
Novianti, R., & Kuswanto, A. (2020). Factors that Influence Firm Value with Earnings Management as Mediating Variable. International Journal of Advance Study and Research Work, 3(3), 2581–5997. https://doi.org/10.18196/jai.2103149
Olalere, O. E., Islam, M. A., Yusoff, W. S., & Mumu, F. E. (2021). Modeling the determinants of firm value of conventional banks: Empirical evidence from asean-5 countries. Asia-Pacific Social Science Review, 21(3), 122–136. https://doi.org/10.59588/2350-8329.1390
Osifo, O., & Evbayiro-Osagie, E. I. (2020). Foreign diversification and performance of quoted deposit money banks in selected Sub-Sahara African countries. Oradea Journal of Business and Economics, 5(special), 82–93. https://doi.org/10.1016/j.rdf.2020.08.001
Ozili, P. K. (2025). Financial inclusion and bank stability: evidence from capital buffer and capital adequacy ratio. Journal of Chinese Economic and Foreign Trade Studies, 18(1), 109–129.
Prenaj, V., Miftari, I., & Berisha, S. (2024). The Determinants of Profitability of Western Balkan Countries Commercial Banks: A panel Data Approach. Economic Alternatives, 30(2), 243–258. https://doi.org/10.37075/EA.2024.2.02
Rakshit, B. (2023). Assessing the effects of cost, revenue and profit efficiency on bank performance: empirical evidence from Indian banking. International Journal of Organizational Analysis, 31(5), 1867–1898. https://doi.org/10.1108/IJOA-06-2021-2802
Sar, A., & Panigrahi, K. (2025). The dynamics of financial performance and market performance in the context of Indian banking industry. F1000Research, 13, 657. https://doi.org/https://doi.org/10.12688/f1000research.151628.2
Suryanto, S., Muhyi, H. A., Kuirniati, P. S., & Mustapha, N. (2022). Banking financial performance in the industry financial technology era. Journal of Eastern European and Central Asian Research (JEECAR), 9(5), 889–900. https://doi.org/https://doi.org/10.15549/jeecar.v9i5.1075
Tarawallie, F. A. B., & Bein, M. (2025). The Moderating Effect of Size on the Relationship Between Liquidity Management and Sustainable Profitability: Evidence from BRICS Financial Firms. Sustainability, 17(18), 8128. https://doi.org/https://doi.org/10.3390/su17188128
Tsekpo, S. P., & Wahua, L. (2023). Corporate governance and banks’ capital adequacy in Gambia: The moderating impact of politics. Journal of Social Sciences and Management Studies, 2(4), 1–14. https://doi.org/https://doi.org/10.56556/jssms.v2i4.504
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.
Yahaya, A., Mahat, F., MH, Y., & Matemilola, B. T. (2022). Liquidity risk and bank financial performance: an application of system GMM approach. Journal of Financial Regulation and Compliance, 30(3), 312–334. https://doi.org/10.3390/jrfm15030112%0A
Unduhan
Diterbitkan
Terbitan
Bagian
Lisensi
Hak Cipta (c) 2026 BizNOMICS: International Journal of Business and Economics
Artikel ini berlisensiCreative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
