The Effect of Profitability and Leverage on Firm Value in the Processed Foods Sub-Sector Listed on the Indonesia Stock Exchange (IDX) During 2021–2025

Abstract

This study aims to analyze the effects of profitability, measured by Return on Assets (ROA), and leverage, measured by the Debt-to-Equity Ratio (DER), on firm value, measured by Price-to-Book Value (PBV), among companies in the processed foods subsector listed on the Indonesia Stock Exchange (IDX) during the 2021–2025 period. This study employs a quantitative approach using multiple linear regression analysis. The population consists of 29 companies, from which 19 companies were selected through purposive sampling. Over the five-year observation period, a total of 95 observations were obtained. The simultaneous test results indicate that ROA and DER jointly have a significant effect on firm value. However, the partial test results show that ROA does not have a statistically significant effect on PBV, indicating that annual profitability alone may not be a decisive factor in shaping market perceptions. In contrast, DER has a positive and statistically significant effect on PBV, suggesting that the productive use of debt financing may send a positive signal to investors and enhance market valuation. The findings highlight the importance of optimizing financing structure efficiency as a strategic measure for management to increase firm value.