Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)

Abstract

How Do Three Financial Analysis Pillars and Investment Policies Define the Firm Value in the Basic Industry and Chemical Sector?

Author(s): Nurdian Susilowati, Siti Ridloah, Rahayu Lestari, Aulia Herdiana

This paper examines the effect of liquidity, profitability, solvency, and investment policies on the firms’ value in an important emerging market. The data are from 29 firms listed on the Indonesia Stock Exchange. The quantitative approach was employed in this research. Regression and descriptive statistics models are used by taking the financial statements of the Basic Industry and Chemicals sector from 2014 to 2017. The results revealed that the current ratio, return on assets, debt to equity ratio, price-earnings ratio significantly affect the company's value with Tobin's Q as a proxy. The debt to assets ratio has no significant effect on the company’s value. The overall results revealed that a well-designed liquidity management policy could increase the firm value in the Basic Industry and Chemicals sector. The research contributes to the signalling theory. There is some information asymmetry between principal and agent.

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