Capital Structure, Asset Efficiency, and Firm Value: Evidence from Indonesian Trading, Services, and Investment Companies Using Fixed Effect Panel Regression

Abstract

This research investigates the influence of capital structure and asset utilization efficiency on firm value among companies operating in the trading, services, and investment sectors listed on the Indonesia Stock Exchange over the 2019–2024 period. The study was conducted based on the phenomenon of changes in firm value, as indicated by fluctuations in Price to Book Value (PBV), as well as the existence of inconsistent empirical evidence regarding the determinants of firm value. This research adopts a quantitative method by utilizing secondary data collected from companies’ annual financial statements. The sample was determined through a purposive sampling technique, producing 101 selected companies with a total of 606 firm-year observations. In this study, firm value is represented by Price to Book Value (PBV), capital structure is evaluated using the Debt to Equity Ratio (DER), and asset efficiency is measured through Total Asset Turnover (TATO). Meanwhile, liquidity, represented by the Current Ratio (CR), is incorporated as a control variable. The data analysis was conducted using panel data regression, with the Fixed Effect Model (FEM) selected based on the results of the Chow test and Hausman test. The empirical findings reveal that capital structure positively and significantly influences firm value. Conversely, asset efficiency does not demonstrate a significant impact on firm value. Additionally, liquidity as a control variable shows a negative and significant relationship with firm value. These results indicate that investors tend to consider companies’ financing strategies more prominently than their ability to utilize assets efficiently when evaluating firm value. Therefore, companies are encouraged to establish an optimal capital structure as a strategic effort to improve market valuation and strengthen investor confidence.