Determinant of firm value: Evidence of oil palm plantation companies

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Abstract

The company’s market value or firm value (FV) is essential for shareholders to maximize wealth (Jensen, 2010). FV is a function of various factors, especially company-specific factors, which are the main drivers (Chen et al., 2019). This study aims to estimate the impact of stock returns (SR), return on assets (ROA), leverage (debt-to-equity ratio, DER), and company’s total assets (SIZE) on FV proxied by price-to-book value (PBV) by methods of data analysis using panel data regression model. The research sample comprised 14 large private oil palm plantation companies on the Indonesia Stock Exchange (IDX). The study’s results prove that SR and SIZE positively affect PBV, while ROA and DER have no effect. Recommendations from the research result that company management must pay attention, so that share prices and total assets are strived to continue to increase because they impact increasing FV, which is profitable for shareholders. A positive response to stock prices can be achieved through better-assessing profitability and leverage ratios and the company’s investment in its fixed assets.

Keywords: Firm Value, Stock Returns, Return on Assets, Leverage, Size

Authors’ individual contribution: Conceptualization — I. and D.W.; Methodology — S.L. and E.E.; Investigation — D.W. and H.; Resources — I. and S.L.; Data Curation — H. and E.E.; Writing — Original Draft — I. and D.W.; Writing — Review & Editing — H. and E.E.; Supervision — I. and E.E.; Project Administration — S.L. and E.E.; Funding Acquisition — I., D.W., and H.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, M41

Received: 04.09.2022
Accepted: 12.04.2023
Published online: 14.04.2023

How to cite this paper: Indupurnahayu, Walujadi, D., Lysandra, S., Hurriyaturrohman, & Endri, E. (2023). Determinant of firm value: Evidence of oil palm plantation companies. Corporate & Business Strategy Review, 4(2), 124–131. https://doi.org/10.22495/cbsrv4i2art11