Firm value determinants: Reconsidering dividend policy’s moderating role in Indonesia’s top-tier stock index

Type of the article: Research Article AbstractInvestors are very interested in companies that have high profits and stable dividend payments. Increasing investment and company profitability increase firm value. This study aims to examine the relationship between liquidity, company size, and earnings quality with firm value and dividend policy as moderators in this relationship. The secondary data used come from the 45 most liquid shares (LQ45) on the Indonesia Stock Exchange and have observations for 10 years from 2014 to 2023. The sample used is 450 data points and is tested using moderated regression analysis. The findings show that earnings quality and liquidity have significant effects on firm value. Conversely, there is no notable effect of firm size on firm value; large assets do not necessarily mean greater firm value if the assets are inefficient. Interactive effect analysis reveals that dividend policy moderates the association between liquidity and firm value, affirming its crucial role in facilitating firm valuation. Also, dividend policy affects the influence of earnings quality on firm value. However, dividend policy does not moderate the relationship between firm size and firm value. Such findings are especially valuable for investors as they indicate that liquid stocks tend to maintain stable dividend payouts, further affirming their value. Moreover, the study suggests that large assets necessarily lead to a greater valuation of a company unless paired with effective management strategies in a volatile business environment.