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Archives of Business Research – Vol. 13, No. 03
Publication Date: March 25, 2025
DOI:10.14738/abr.1303.18481.
Kurniawanto, H., Widarno, B., & Hapsari, Y. M. (2025). Dividend Policy as a Moderating Variable on the Relationship between
Profitability, Leverage and Firm Value in the Consumer Goods Manufacturing Sector Listed the Indonesia Stock Exchange. Archives
of Business Research, 13(03). 226-236.
Services for Science and Education – United Kingdom
Dividend Policy as a Moderating Variable on the Relationship
between Profitability, Leverage and Firm Value in the Consumer
Goods Manufacturing Sector Listed the Indonesia Stock Exchange
Hudi Kurniawanto
Faculty of Economics,
Slamet Riyadi University, Surakarta, Indonesia
Bambang Widarno
Faculty of Economics,
Slamet Riyadi University, Surakarta, Indonesia
Yogandhini Maharani Hapsari
Faculty of Economics,
Slamet Riyadi University, Surakarta, Indonesia
ABSTRACT
This study aims to analyze the effect of profitability and leverage on company value
with dividend policy as a moderating variable. The population in the study is the
Consumer Sector Manufacturing Companies Listed on the IDX in the period 2020-
2022. The data source of this study is secondary data. The analysis method of this
study uses Descriptive Statistics, Classical Assumption Test, Hypothesis Test,
Multiple Linear Regression Analysis, Moderated Linear Regression Test (MRA). The
results of the study indicate that profitability and leverage have a significant effect
on firm value. While profitability and leverage with dividend policy as a moderating
variable have a significant effect on firm value.
Keywords: Profitability, Leverage, Firm Value, Dividend Policy.
INTRODUCTION
Firm value is a description of the general condition of the company. Investors use firm value as
a measure of a company, which is often associated with stock prices. Firm value plays an
important role in showing the prosperity of shareholders in the company. High stock prices
also make the firm value high. Firm value is very important because with high firm value will
be followed by high prosperity of shareholders (Brigham & Houston, 2014). Prosperity
shareholders are reflected by the market price of the shares which is a reflection of investment,
funding and asset management decisions. Several factors that can affect the value of the
company include profitability. The phenomenon that occurred at PT Kimia Farma Tbk reported
financial performance for the 2022 financial year, revenue from operations which reached IDR
9.61 trillion decreased by 25.29% compared to the previous year. Although it succeeded in
reducing the cost of goods sold to IDR 8.46 trillion, the company's gross profit also decreased
by 18.28% to IDR 3.6 billion. Operating profit decreased by 43.38% to IDR 558.07 billion. After
deducting tax expenses, the company recorded a current year loss of IDR 170.05 billion. The
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Kurniawanto, H., Widarno, B., & Hapsari, Y. M. (2025). Dividend Policy as a Moderating Variable on the Relationship between Profitability, Leverage
and Firm Value in the Consumer Goods Manufacturing Sector Listed the Indonesia Stock Exchange. Archives of Business Research, 13(03). 226-
236.
URL: http://doi.org/10.14738/abr.1303.18481
company's assets increased to IDR 20.35 trillion, liabilities increased to IDR 11.01 trillion, and
equity increased to IDR 9.34 trillion in December 2022 (Liputan6.com, 2022).
Profitability is one of the important things for a company to be able to maintain its business,
because if the profitability of the company is high, the profit obtained by the company is also
high so that it can increase the value of the company. Research Mirry (2016) and Dewa's
research (2017) found that profitability has a significant effect on firm value. However,
research by Ni Putu (2021) and Nova (2018) the results are contradictory, namely that
profitability does not have a significant effect on firm value.
Research by Adetunji et al. (2016), Yanti and Abundanti (2019), and Febrianti (2012) shows
the results that leverage has a positive effect on firm value, which means that if leverage
increases, the firm value will also increase. This is different from Sari and Baskara (2019) and
Ferina et al. (2015) who said that leverage has no effect on firm value.
Previous research shows inconsistent results, it is suspected that there are other variables that
influence the relationship between profitability and leverage with firm value, namely dividend
policy as a moderating variable that can influence the relationship between profitability and
leverage on firm value. Based on the background description above, the purpose of this study
is to determine the effect of profitability and leverage on firm value and the effect of dividend
policy on the relationship between profitability and leverage with firm value.
LITERATURE REVIEW
Signal Theory
Signal Theory according to Brigham & Houston (2014) is a behavior of company management
in providing information to investors related to management's views on the company's future
prospects. This signaling is intended to reduce unbalanced information between the company
and investors.
Firm Values
Firm value is an investor's view of the company's level of success in managing the company's
resources. Increasing firm value is an achievement desired by company owners, the increasing
firm value will increase investor interest in investing their capital in the company. Increasing
stock prices will also make the firm's value high, and can increase market confidence in the
company's prospects in the future (Lutwihajib, Arifati, and Raharjo, 2016).
Profitability
Profitability is the ability of a company to generate profits by using the company's resources
such as assets, capital, or company sales (Sudana, 2015). Companies that have high profitability
tend to be in demand by investors. High profitability indicates that the company has good
prospects in the future.
Leverage
Leverage is the level of external funding a company receives, where the company must generate
more profit on the money borrowed than the interest burden borne (Harrison Jr et al., 2011).
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Services for Science and Education – United Kingdom
Dividend Policy
According to (Sudana, 2015) dividend policy is related to determining the amount of net profit
to be distributed as dividends to shareholders, whether the profit will be distributed or
retained as retained earnings. According to (Palupi & Hendiarto, 2018) if the dividends
distributed to shareholders are high, it can cause retained earnings to be lower. However, if the
company prioritizes company growth, the retained earnings will be higher so that the dividends
distributed will be lower.
Hypothesis Development the Influence of Profitability on Firm Value
Profitability is the ability of a company to generate profits. Signaling theory explains the
behavior of company management in providing information to investors regarding
management's views on the company's future prospects. If the company generates high profits,
then the company has good prospects so that it will give a positive signal to investors. High
profits indicate that the company's performance is good and will make investors interested in
investing their capital in the company, so that it can increase the firm's value. This is in line with
research conducted by Suwardika and Mustanda (2017), Novari and Lestari (2016) showing
that profitability has a positive and significant effect on firm value.
➢ H1: Profitability has a positive effect on firm value.
The Effect of Leverage on Firm Value
According to Febrianti (2012), the more debt, the more it can increase the firm's value because
the interest costs on debt can reduce tax payments. Research by Adetunji et al. (2016), Yanti
and Abundanti (2019) showed that leverage can affect firm value because the size of the
company's debt can affect investors' perceptions in buying shares.
➢ H2: Leverage has a positive effect on firm value
Dividend Policy Moderates the Effect of Profitability on Firm Value
Dividend policy is a policy taken by a company about whether the profits generated by the
company will be distributed or retained as retained earnings. Signal theory explains the
behavior of company management in providing information to investors related to
management's views on the company's future prospects. Dividend policy is able to strengthen
profitability towards the firm's value. Dividend payments made by the company show that the
company has good performance. good. The company's ability to pay dividends is also closely
related to obtaining profits. If the company obtains high profits, then the company's ability to
pay dividends is also high. With large dividend payments will increase firm value and can
provide a positive signal to investors about the company's future prospects. The dividend
payment shows that the company have good company performance. High dividends will
strengthen the influence of profitability on firm value. For companies, large dividends will affect
stock prices which tend to be high, thus making the firm value also high. Research conducted
by Mery (2017), Oktaviani and Mulya (2018) policy dividends are able to moderate the
relationship between profitability and firm value.
➢ H3: Dividend policy is able to moderate the relationship between profitability and firm
value.
Dividend Policy Moderates the Effect of Leverage on Firm Value