IDEAS home Printed from https://ideas.repec.org/h/eme/isetez/s1571-03862023000033a009.html
   My bibliography  Save this book chapter

Profitability and Firm Value: The Role of Industry Competition, Market Value of Equity, and Debt Levels

In: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia

Author

Listed:
  • Dany Adi Saputra
  • Doddy Setiawan

Abstract

This study examines the role of industry competition, market capitalization, and debt levels in the relationship between profitability and firm value (FV). The sample included companies listed on the Indonesia Stock Exchange (IDX) in the manufacturing sector in 2017–2019. This study provides empirical evidence that the high level of industrial competition (IC), low level of market capitalization (market value of equity, MVE), and high levels of debt (debt-to-assets ratio, DAR) weaken the effect of profitability as measured by return on assets (ROA) on FV as measured by Tobin’s Q. Profitability is not even related to FV for firms facing high industry competition. In addition, profitability only has a marginal positive relationship with FV for firms with relatively small market capitalizations. These findings suggest that the relationship between profitability and FV is not monotonous but is influenced by the level of industry competence, market capitalization, and debt.

Suggested Citation

  • Dany Adi Saputra & Doddy Setiawan, 2023. "Profitability and Firm Value: The Role of Industry Competition, Market Value of Equity, and Debt Levels," International Symposia in Economic Theory and Econometrics, in: Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia, volume 33, pages 127-139, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-03862023000033a009
    DOI: 10.1108/S1571-03862023000033A009
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/S1571-03862023000033A009/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S1571-03862023000033A009/full/epub?utm_source=repec&utm_medium=feed&utm_campaign=repec&title=10.1108/S1571-03862023000033A009
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S1571-03862023000033A009/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/S1571-03862023000033A009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Industry competition; market capitalization; debt level; profitability; firm value; Indonesia Stock Exchange; G2; G32; G31;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:isetez:s1571-03862023000033a009. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.