THE EFFECT OF FINANCIAL PERFORMANCE ON THE COMPANY VALUE CASE OF BANKING INDUSTRY IN INDONESIAN STOCK EXCHANGE

Abstract

This study aims to determine the effect of banking financial performance on company value on the Indonesia Stock Exchange for the 2017-2020 period. Financial performance is measured using the Risk Based Bank Rating (RBBR) method with 4 factors: Risk Profile, Good Corporate Governance (GCG), Earning, and Capital (RGEC). This research use quantitative data, the data taken from banking annual reports for the 2017-2020. The data analysis techniques used in this study were statistical descriptive analysis, Chow test and Hausman to test the model, classical assumption test (normality test, multicollinearity test, and autocorrelation test), and multiple linear regression analysis (MRA) to test the hypothesis. The results showed that the non-performing loan (NPL) ratio had a negative effect on firm value, the loan to deposit (LDR) ratio had insignificant effect on firm value, GCG, NIM, and CAR had insignificant effect on the firm, and the ROA ratio had a significant negative effect on firm value. Based on the empirical results only NPL has effect on banking company value while the other variables were not. Future research suggest to use other independent variables or add new independent variables, use longer observation periods and using better testing tools for a better results.