The Effect of Financial Performance on Firm Value Included in the SRI Kehati Index on the Indonesia Stock Exchange, as A Representation of Corporate Behavior

Abstract

This research is aimed to examine the effect of Return on Assets (ROA) and Return of Equity (ROE) on the Firm Value which is included in the SRI - Kehati Index category. The study was conducted using secondary data in the form of financial statements of manufacturing companies included in the SRI - Kehati Index listed on the Indonesia Stock Exchange (BEI) in the period 2013 to 2017. Based on signaling theory and using multiple regression, it was found that the two hypotheses tested in this study provide significant results. The results revealed that the financial performance of the SRI - Kehati index, whether measured through ROA or through ROE, affected the firm's value.

Keywords: return on assets, return on equity, firm value, SRI index

DOI: 10.7176/RJFA/10-22-13

Publication date: November 30^th 2019