Investigate the Effect of the Financial Position Diagnosis, Performances Diagnosis and Cash Flow Diagnosis on the Firm Value in listed companies of Stock Exchange

Abstract

Financial diagnosis is a set of methods and tools that can help to assess the financial position and performance of company. In fact, it helps to understand the past, present and the future planning of the company. This study aims to evaluate the effects of three components of financial diagnosis on the firm value, using Structural Equation Modeling SMART-PLS as the tool of analysis. The research sample consisted of all listed manufacturing companies in Stock Exchange during the years 2009-2013. In this study dependent variable is the value of the company and indicators of financial position diagnosis, performance diagnosis, cash flow diagnosis are considered as independent variables. Results of this study showed that the variables cash flow diagnosis and performance diagnosis have a significant and positive effect on firm value. But financial position diagnosis has significant and weak effect on the firm value. In the modified model by removing the indicators related to negative factor loadings the significant effect between financial position diagnosis and firm value will be positive and strong.

Keywords: Financial Diagnosis, Financial Position Diagnosis, Performances Diagnosis, Cash Flow Diagnosis, Firm Value