The Influence of Liquidity, Solvency, and Profitability on Firm Value in Indonesian Heavy Construction
DOI:
https://doi.org/10.31098/issues.v6i1.3701Keywords:
Liquidity, Solvency, Profitability, Firm Value, Heavy Construction, Financial PerformanceAbstract
Indonesia’s construction sector has grown significantly as the fifth-largest contributor to the national GDP, with a business value of Rp 423.4 trillion, mainly driven by the development of Nusantara. However, the Price-to-Book Value (PBV) ratio, which assesses the value of a business in the building construction subsector, has varied and dropped precipitously in 2023, suggesting that investor trust in these businesses has diminished. This research examines the effects of liquidity, solvency, and profitability on firm value in the Indonesia Stock Exchange’s heavy construction and civil engineering subsector during the 2021–2024 period. Three independent variables are used: liquidity, solvency, and profitability. The dependent variable is firm value. The study employs secondary quantitative data from annual financial reports. The study’s sample consisted of 19 (nineteen) enterprises chosen by purposive selection procedures, whereas the population comprised all 27 (twenty-seven) Indonesia Stock Exchange-listed businesses in the Heavy Construction and Civil Engineering Sub-Sector. Multiple linear regression analysis and the classical assumption test are two of the analytical tools used in SPSS 27. The results of the regression analysis show that profitability has a negative and significant impact, solvency has a positive and substantial impact, and liquidity has a positive and significant influence on the firm value variable. Therefore, this study highlights the importance of sound liquidity management and capital structure decisions in influencing investor perceptions and firm value within the construction sector.
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