The Influence of Risk Management on Financial Performance and Firm Value: A Case Study on Companies of Crude Petroleum and Natural Gas Production Sector Listed at the IDX 2016 – 2019

Abstract

This study is explanatory research, the sample in this study is crude petroleum and natural gas production companies listed on the Indonesia Stock Exchange in the period 2016 – 2019. The empirical analysis uses time-series data of Dividend, Earning, ROA, NPM, Tobin’s Q, and Closing Price in those periods. The latent variable in this study is risk management, financial performance, and firm value. The inferential statistical method used to analyze in this study is component-based using Generalized Structured Component Analysis (GSCA).This study finds that a decrease in risk by risk management will not significantly increase financial performance, and an increase in financial performance will not significantly decrease the risk by risk management. A decrease in risk by risk management will significantly increase firm value, and an increase in firm value will significantly decrease the risk by risk management, but the impact of the increase in firm value on risk is bigger than the impact of the decrease in risk on firm value.This study also finds that an increase in financial performance will significantly increase firm value, and an increase in firm value will significantly increase financial performance, but the impact of the increase in firm value on financial performance is bigger.

Keywords: Risk, Risk Management, Financial Performance, Firm Value.

DOI: 10.7176/EJBM/12-23-14

Publication date:August 31^st 2020