Dividend Policy, Debt Policy, and Firm Value: The Moderating Role of Profitability in Indonesian Automotive Firms

Abstract

Company value is one of the main indicators reflecting a company's success in creating shareholder wealth. The decline in firm value in the automotive subsector is indicated by a downward trend in Price to Book Value (PBV), influenced by fluctuations in macroeconomic conditions, increasing production costs, and shifts in consumer preferences toward more efficient and environmentally friendly products. The purpose of this study is to examine the effect of dividend policy and debt policy on firm value, with profitability as a moderating variable. The population consists of companies in the automotive and component subsector listed on the Indonesia Stock Exchange for the period 2017–2024. The sample was selected using a purposive sampling method, resulting in 7 companies observed over eight years, yielding a total of 56 observations. The data used are secondary data obtained from the companies’ financial statements available on the official website www.idx.co.id. The analytical method applied is panel-data regression with Moderated Regression Analysis using EViews 13. The results indicate that dividend policy has no significant effect on firm value, and profitability weakens the relationship between dividend policy and firm value. This suggests that dividends are not the primary indicator used by investors in evaluating company performance. Meanwhile, debt policy has a significant effect on firm value, and profitability strengthens the relationship between debt policy and firm value. This implies that companies with higher profitability are more capable of managing their financial obligations effectively, thereby increasing firm value.