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Macroeconomic and financial dimensions influences on Indonesia's property and real estate companies value (2017-2022)

Author

Listed:
  • Olivia Devania Yurisafira

    (Institut Teknologi Bandung)

  • Yos Sunitiyoso

    (Institut Teknologi Bandung)

  • Raden Aswin Rahadi

    (Institut Teknologi Bandung)

Abstract

This paper investigates the relationship between macroeconomic factors, firm financial position, and firm value in Indonesia's property and real estate sector from 2017 to 2022. The property and real estate sectors significantly influence Indonesia's economic growth. Nevertheless, the real estate sector has encountered significant obstacles in recent years, notably during the COVID-19 pandemic, due to volatility in interest rates, high construction costs, and the sluggish property market. This study aims to address the existing research gap by investigating the relationship between macroeconomic indicators, including GDP growth, inflation rates, and interest rates, as well as financial factors, such as profitability and leverage, on the industry’s firm value over a specified timeframe. Using panel data regressions, the study analyzes 162 observations from 27 listed property and real estate companies. The empirical findings demonstrate that property and real estate firms have the potential to enhance their overall performance and increase shareholder value by considering the interconnectedness of economic conditions and the financial position of the firm. Profitability emerges as a significant predictor of firm value, while the selected macroeconomic factors have significant and insignificant effects on the valuation of firms. Meanwhile, since this industry has substantial leverage, this variable does not affect firm value. This study also highlights that the critical component that drives the evaluation of a firm's value is heavily influenced by the specifics of the industry and the regulatory framework in which the business operates. Key Words:Real Estate, Macroeconomic Factor, Profitability, Firm Value

Suggested Citation

  • Olivia Devania Yurisafira & Yos Sunitiyoso & Raden Aswin Rahadi, 2023. "Macroeconomic and financial dimensions influences on Indonesia's property and real estate companies value (2017-2022)," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 12(9), pages 229-240, December.
    • Handle: RePEc:rbs:ijbrss:v:12:y:2023:i:9:p:229-240
    DOI: 10.20525/ijrbs.v12i9.3053
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    References listed on IDEAS

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    1. Nur Triani & Deden Tarmidi, 2019. "Firm Value: Impact of Investment Decisions, Funding Decisions and Dividend Policies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(2), pages 158-163, April.
    2. Masulis, Ronald W, 1983. "The Impact of Capital Structure Change on Firm Value: Some Estimates," Journal of Finance, American Finance Association, vol. 38(1), pages 107-126, March.
    3. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    4. Dennis R. Capozza & Yuming Li, 2001. "Residential Investment and Interest Rates: An Empirical Test of Land Development as a Real Option," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(3), pages 503-519, March.
    Full references (including those not matched with items on IDEAS)

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