Capital Structure and Firm Size Effects on Firm Value: The Mediating Role of Profitability

Abstract

Abstract - This study aims to analyze the effect of capital structure and firm size on firm value with profitability as a mediating variable in property and real estate companies listed on the Indonesia Stock Exchange during the 2020–2024 period. The property sector plays an important role in supporting the Indonesian economy but is highly vulnerable to global economic fluctuations, especially during and after the COVID-19 pandemic. This research applies a quantitative approach using secondary data collected from company financial statements and the Indonesia Stock Exchange website. The sample consists of 16 companies with 80 observations selected through non-random sampling techniques. Panel data regression analysis using E-Views software was employed to test the hypotheses. The findings reveal that capital structure has a negative and significant effect on profitability, while firm size does not significantly affect profitability. Furthermore, capital structure and firm size do not significantly influence firm value. Profitability, however, has a negative and significant effect on firm value and successfully mediates the relationship between capital structure and firm value, but fails to mediate the relationship between firm size and firm value. These findings indicate the importance of financial management strategies in maintaining firm value in the property and real estate sector.