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Liquidity and Firm Size as Determinants of Firm Value: An Empirical Study on Textile and Garment Companies in the Indonesia Stock Exchange (IDX)

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  • Jamal Hanaffy

    (Lecturer of Postgraduate Directorate, Universitas Mitra Bangsa, Jakarta-Indonesia)

Abstract

This study examines the influence of liquidity and firm size on firm value, focusing on textile and garment companies listed on the Indonesia Stock Exchange (IDX) during the period 2020-2024. Using an associative quantitative research method and purposive sampling, data from 10 (ten) companies were analyzed employing multiple linear regression. Liquidity is measured by the Current Ratio (CR), while firm size is proxied by the natural logarithm of total assets, with firm value proxied by the Price to Book Value (PBV). The regression model in this study is Y = 0.706X1 + 0.287X2 + e. The findings reveal that both liquidity and firm size have a significant positive impact on firm value. Higher liquidity, indicated by an improved Current Ratio, signals a firm's ability to meet short-term obligations, thereby increasing investor confidence and elevating PBV. Similarly, larger firms enjoy better access to resources and financial stability, which positively influence their market valuation. This study supports trade-off and signaling theories by highlighting the critical role of liquidity and firm size in shaping firm value. Practical implications suggest that management should optimize liquidity and asset utilization to enhance shareholder wealth.

Suggested Citation

  • Jamal Hanaffy, 2025. "Liquidity and Firm Size as Determinants of Firm Value: An Empirical Study on Textile and Garment Companies in the Indonesia Stock Exchange (IDX)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(9), pages 6448-6456, September.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-9:p:6448-6456
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    References listed on IDEAS

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