The Impact of Debt Policy and Profitability on Dividends and Firm Value

D Susanto, F A S Bryna, H Subagyo, D E Waluyo

Abstract


Abstract: This research examined the direct and indirect effects of debt policy and profitability on firm value, with dividends mediating variables, particularly in the non-cyclical consumer goods industry. The choice of this industry is significant as it represents a stable and less volatile sector, providing a unique context for studying the relationship between debt policy, profitability, and firm value. Debt policy is proxied by the debt-to-equity ratio (DER), profitability is proxied by return on equity (ROE) and earnings per share (EPS), and dividends are proxied by the dividend payout ratio (DPR). At the same time, firm value is measured by price-to-book value (PBV). The analytical tool employed in this study was robust, utilizing multiple regressions processed with IBM SPSS 24 and the Sobel test statistic to examine the mediating role. The data consisted of 156 observations from companies from 2020 to 2022, using purposive sampling techniques to ensure a comprehensive and reliable research process. The findings of this study, which were of significant importance, indicated that debt policy does not affect dividend payments but positively impacts firm value. Profitability, measured by ROE and EPS, positively influenced firm value directly and indirectly. Additionally, ROE and EPS also affect dividends. The mediation test results showed that dividends do not mediate the relationship between debt policy and firm value. However, dividends were confirmed to be a mediating variable in the relationship between profitability and firm value.

Keywords


Debt Policy; Profitability; Firm Value.

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