The Effect of Financial Determinants on Firm Value Iin Telecommunications Companies Listed on The Indonesia Stock Exchange

Abstract

Firm value reflects the market’s assessment of a company’s performance and future prospects. However, in the capital-intensive telecommunications industry, substantial assets, investment, earnings, liquidity, growth, and debt usage are not necessarily followed by higher market valuations. This study aims to examine the effects of profitability, leverage, firm size, liquidity, and growth on the firm value of telecommunications subsector companies listed on the Indonesia Stock Exchange during 2019–2025. A quantitative approach was employed using panel data regression and purposive sampling, resulting in a balanced panel dataset. The Chow and Hausman tests identified the Fixed Effects Model as the most appropriate estimation model. Statistical inference was conducted using White period cross section clustered robust standard errors with a degrees-of-freedom correction, while the joint effect of the independent variables was evaluated using the Wald test. The results indicate that leverage has a positive and significant effect on firm value, whereas firm size has a negative and significant effect. Meanwhile, profitability, liquidity, and growth do not significantly affect firm value. These findings demonstrate that investors assess not only the magnitude of financial ratios but also the productive use of debt, asset efficiency, cash-flow-generating capacity, and firm-specific characteristics. Theoretically, the findings support the benefit side of trade-off theory and demonstrate that financial information functions as a meaningful signal when it reflects productive resource utilization. Practically, telecommunications companies should maintain controlled leverage, allocate debt to productive investments, improve asset utilization, and accelerate the monetization of network investments. Investors should also consider debt allocation, asset productivity, and cash-flow quality when evaluating telecommunications companies.