the Effect of Corporate Governance and Liquidity Risk on Firm Value in the Banking Subsector Listed on the Indonesia Stock Exchange in 2022-2024

Abstract

ABSTRACT

Purpose: The main purpose of this study is to gain a better understanding of the impact of corporate governance and liquidity risk on firm value, both partially and simultaneously.

Design/methodology/approach: This research uses a quantitative method by utilizing secondary data taken from annual reports and financial statements of banking companies listed on the Indonesia Stock Exchange for the 2022-2024 period. The samples used in the study were selected using a purposive sampling method, resulting in 120 observations from 40 banks over three years. For data analysis, multiple linear regression is used with the support of IBM SPSS Statistics software through classical assumption testing, which includes tests for normality, multicollinearity, heteroscedasticity, hypothesis testing (t-test), Simultaneous Test (F Test), and autocorrelation. In addition, data transformation and the use of lag methods were also conducted to improve the accuracy of the research model.

Findings: Evidence shows that corporate governance does not have a significant effect on Company Value, while Liquidity Risk has a significant effect. These findings indicate that investors are more responsive to the company's financial condition compared to the corporate governance structure. Simultaneously, corporate governance and liquidity risk have a significant effect on company value in the banking subsector listed on the Indonesia Stock Exchange for the 2022-2024 period.

Research limitations/implications: This research has several limitations, namely that it only uses two independent variables, namely corporate governance and liquidity risk. Furthermore, the corporate governance variable is only proxied using independent commissioners, so it does not fully reflect the quality of corporate governance implementation as a whole. In addition, the time scope of this research is limited to specific periods and company sectors.

Practical implications: This research highlights the importance of liquidity risk management as well as the implementation of corporate governance in increasing investor confidence and capital market efficiency, which will ultimately support sustainable economic growth and development.

Originality/value: This research contributes to the development of literature on the influence of corporate governance and liquidity risk on firm value in the banking subsector in Indonesia. The value of this study lies in the utilization of the latest data from 2022 to 2024 as well as testing both variables simultaneously to explain firm value.

Paper type: Research Paper

Keyword: Corporate Governance, Liquidity Risk, Firm Value, Agency Theory, Signaling Theory.