The Role Of Corporate Governance As A Moderator: Profitability And Leverage On Company Value

Abstract

The present study focuses on the impact of profitability and leverage on the firm value, with the specific interest given to the moderating effect of corporate governance, characterized by the ownership structure. Understanding this association is important to enhance corporate financial policy and investor confidence. Evidence were obtained trough secondary data, derived from the JKSE-listed manufacturing company’ financial statements throughout 2019 to 2022. Modulation regression analysis was performed with EViews to test the moderating role of each moderator. The results show the significance of both profitability and leverage on firm value. In addition, corporate governance, as manifested by the ownership structure, has an important effect in moderating interventions' impact. It magnifies the favorable influence of profitability to firm value and moderates the negative leverage structure. The paper concludes that good corporate governance enhances the association between financial performance and firm value. These findings highlight the significance of ownership structure in corporate governance mechanisms aimed at enhancing the sustainability of corporate value. The results add to extant literature by considering governance as an essential moderation role while having important policy and company stakeholder implications for promoting management transparency and accountability.