Determinants of Banking Firm Value in The LQ45 Index: The Role of Liquidity, Leverage, Asset Turnover and Profitability

Abstract

This study investigates the determinants of banking firm value listed in the LQ45 Index of the Indonesia Stock Exchange during the 2017–2023 period, focusing on the roles of liquidity, leverage, asset turnover, and profitability. Using secondary data derived from annual financial statements, panel data regression was employed, with the optimal model selected based on the Chow and Lagrange Multiplier (LM) tests. The findings reveal that Return on Assets (ROA) and Total Asset Turnover (TATO) exert a positive and statistically significant influence on Price to Book Value (PBV), while Return on Equity (ROE), Debt to Asset Ratio (DAR), and Loan to Deposit Ratio (LDR) do not demonstrate significant effects. The model yields an R-squared value of 0.6530 and an adjusted R-squared of 0.5932, indicating that approximately 65.3% of the variance in PBV can be explained by the independent variables. ROA and TATO are thus identified as the key determinants of banking firm value in the LQ45 Index during the study period.