M.

JIHADI, Elok VILANTIKA, Sayed Momin HASHEMI, Zainal ARIFIN, Yanuar BACHTIAR, Fatmawati SHOLICHAH /
Journal of Asian Finance, Economics and Business Vol 8 No 3 (2021) 0423–0431 423

Print ISSN: 2288-4637 / Online ISSN 2288-4645

doi:10.13106/jafeb.2021.vol8.no3.0423

The Effect of Liquidity, Leverage, and Profitability on Firm Value:

Empirical Evidence from Indonesia

M. JIHADI1, Elok VILANTIKA2, Sayed Momin HASHEMI3, Zainal ARIFIN4,

Yanuar BACHTIAR5, Fatmawati SHOLICHAH6

Received: November 20, 2020 Revised: January 26, 2021 Accepted: February 03, 2021

Abstract
This study aims to examine the effect of liquidity, activity, leverage, and profitability on firm value, as well as the effect of disclosure of
corporate social responsibility (CSR), which in this study is a moderator and company size as a control variable. The sampling technique used
in this study is a purposive sampling method with certain criteria, to obtain a sample of 22 LQ45 index companies listed on the Indonesia
Stock Exchange in 2014–2019. The data analysis method in this study used was the Multiple Linear Regression Analysis with the SPSS 18
Program. The results show that the ratios of liquidity, activity, leverage, and profitability are significant to firm value in accordance with the
initial hypothesis of the study. Corporate Social Responsibility (CSR) plays a role as a moderating variable and company size variable as a
control variable on the effect of financial ratios (liquidity, activity, leverage, and profitability) on firm value. The implication of this research is
that CSR has a very important role in increasing company value. To attract more investors, companies must pay attention not only to financial
performance but also to social performance. Large-scale companies tend to do more CSR so that the company value will increase.

Keywords: Financial Ratio, Corporate Social Responsibility, Firm Value, Firm Size

JEL Classifications Code: G30, M14, M21, M41

1. Introduction a company to achieve superior margins compared to its

competition and generates value for the company and its
A competitive advantage is an attribute that enables shareholders. A competitive advantage distinguishes a
a company to outperform its competitors. This allows company from its competitors. It contributes to higher prices,
more customers, and brand loyalty. Establishing such an
First Author. Lecturer, Faculty of Economics and Business,
1
advantage is one of the most important goals of any company.
Universitas Muhammadiyah Malang, Indonesia. In today’s world, it is essential to business success. Without
Email: jihadi@umm.ac.id it, companies will find it difficult to survive. Competitive
Directorate of Postgraduate Programs, Universitas Muhammadiyah
2
advantage is maintained to achieve the company’s goals,
Malang, Indonesia. Email: elokvilant@gmail.com
Corresponding Author. Directorate of Postgraduate Programs,
3 namely the welfare of shareholders, which can be achieved
Universitas Muhammadiyah Malang, Indonesia [Postal Address: Jl. by optimizing company value. The value of the company
Raya Tlogomas 246, Malang 65144, Indonesia] can be reflected by the share price. The increase in company
Email: eiraj.hashemi1@gmail.com value is usually marked by an increase in the stock price in
Associate Professor, Faculty of Economics and Business, STIE
4

Indonesia Banjarmasin, Indonesia. the market and vice versa. A company’s stock price reflects
Email: zainal@stiei-kayutangi-bjm.ac.id investor perception of its ability to earn and grow its profits
Associate Professor, STIE Indonesia Banjarmasin, Indonesia.
5
in the future. The ups and downs of stock prices can be
E-mail: yanuarbachtiar@stiei-kayutangi-bjm.ac.id
Lecturer, Faculty of Economics and Business, STIKES Bhakti
6 influenced by the condition and financial position of each
Al-Qodiri, Jember, Indonesia. Email: fsholichah@gmail.com company which often changes every period.
Financial performance is a subjective measure of how
© Copyright: The Author(s)
This is an Open Access article distributed under the terms of the Creative Commons Attribution well a firm can use assets from its primary mode of business
Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits
unrestricted non-commercial use, distribution, and reproduction in any medium, provided the
and generate revenues. The term is also used as a general
original work is properly cited. measure of a firm’s overall financial health over a given
 M. JIHADI, Elok VILANTIKA, Sayed Momin HASHEMI, Zainal ARIFIN, Yanuar BACHTIAR, Fatmawati SHOLICHAH /
424 Journal of Asian Finance, Economics and Business Vol 8 No 3 (2021) 0423–0431

period (Fatihudin et al., 2018). A Financial Performance Firm value is not only influenced by financial aspects.
Report is a summary of the Financial Performance of a Corporate Social Responsibility (CSR) CSR is becoming
Company that reports the financial health of a company more important for investors because they are more
helping various investors and stakeholders take their concerned about where and how their money is invested.
investment decision. A healthy company is a company that Business goals are inseparable from the environment and
has a good financial performance, therefore, the company society in which they operate and the failure to perform
value is high. A high company value will attract investors long-term social and environmental makes a business
to invest in the company as such there will be an increase in unsustainable. CSR can be understood as a concept of
stock prices, and when the company’s financial performance management and a process whereby companies merge
is bad it will cause a decline in stock prices (Harningsih social and environmental concerns in their businesses and
et al., 2019). relationships with stakeholders. Previously, CSR disclosure
Firm value is an economic concept that reflects the value in the company’s annual report was voluntary, but now it has
of a business. It is the value that a business is worthy of become a mandatory disclosure. CSR is related to company
at a particular date. Theoretically, it is an amount that one value because this activity can affect people’s preferences
needs to pay to buy/take over a business entity. Financial for the company. Kim et al. (2018) stated that CSR has a
performance reflects the company’s ability to manage and positive influence on firm value, but Hafez (2016) proved
allocate its resources. There is a statistically significant impact that CSR has an insignificant negative effect on firm
of financial performance on firm value. The good financial value and a significant positive effect on firm’ financial
performance of the company is the primary consideration performance measured by Return on Assets (ROA) and
by investors in making investment decisions. Improved Return on equity (ROE).
financial performance is expected to increase the firm value, Another factor that can affect firm value is firm size. The
so that the higher the financial performance, the higher the size of a business unit means the size of a business firm.
firm value (Widagdo et al, 2020). The Modigliani and Miller It means the scale or volume of operation turned out by a
(1958) theorem state that a company’s capital structure is single firm. The study of the size of a business is important
not a factor in its value. Market value is determined by the because it significantly affects the efficiency and profitability
present value of future earnings. The valuation of a company of the firm (Putra & Lestari, 2016). According to Signaling
is irrelevant to its capital structure. It is also irrelevant, to theory, size has a role to increase company value. Sudiyatno
whether the company is highly leveraged or low debt because et al. (2020) stated that firm size has a significant positive
of its market value. It depends only on the operating profits effect on firm value but Hirdinis (2019) stated the opposite.
of the company. This theory is also called as capital structure One of the indexes that are actively traded on the Indonesia
irrelevance principle. Stock Exchange is the LQ-45 index. LQ45 is a stock market
The measuring instrument used in assessing financial index for the Indonesia Stock Exchange (IDX). The LQ45
performance is the financial ratio method. Financial ratio index consists of 45 companies that have stocks with
analysis is performed by comparing two items in the financial high liquidity, large market capitalization, and fairly good
statements. The resulting ratio can be interpreted in a way stock fundamentals.
that is more insightful than looking at the items separately. The position of the company for each period will be
Financial ratios can be classified into ratios that measure: different; there will be those who remain, but some will
(1) profitability, (2) liquidity, (3) management efficiency, enter and leave the LQ45 list. Usually every year February
(4) leverage, and (5) valuation and growth (Syamsuddin, till August, the IDX issues the latest LQ 45 list. LQ-45 has
2009). In this study, for the purpose of financial ratio a big enough role in boosting the Jakarta Composite Index
analysis, we use four ratios, namely liquidity ratios, activity (JCI) increase which will affect the overall stock exchange
ratios, leverage ratios, profitability ratios. The reason for performance. The performance of stock instruments in
using four ratios is because one ratio alone is not sufficient to 2019 was generally under pressure. Even though several
provide an assessment of the company’s financial condition stocks fell, some of the leading stocks that were members
and performance. of the LQ45 index shot up to more than 50%. In 2019, the
Many previous researchers have conducted theoretical performance of the LQ45 stock index from the beginning
studies regarding the effect of financial ratios on firm value. of the year to the end of the year had increased by 1.86%,
Kurnia et al. (2020) stated that financial ratios have an effect ahead of the Jakarta Composite Index (IHSG) which grew
on firm value, while Husna and Satria (2019) stated that only by 0.28% over the same period. 5 stocks in the LQ45
Return on Asset (ROA) has an effect firm value, while Debt index had increased by more than 50%, which included the
to Asset Ratio (DAR) and Current Ratio (CR) does not affect chemical industry, advertising media, Islamic banking, and
firm value. telecommunications (Muamar, 2019).
 M. JIHADI, Elok VILANTIKA, Sayed Momin HASHEMI, Zainal ARIFIN, Yanuar BACHTIAR, Fatmawati SHOLICHAH /
Journal of Asian Finance, Economics and Business Vol 8 No 3 (2021) 0423–0431 425

Based on the phenomena that have been stated and Higher leverage ratios tend to indicate a company or stock
referring to the results of several previous studies which show with higher risk to shareholders.
mixed and inconsistent results, this study aims to examine Activity ratio. The activity ratio is a ratio used to measure
and analyze the effect of financial ratios as measured by the effectiveness of a company by using its assets. In this
the profitability ratio (Return on Equity (ROE)), liquidity study, the activity ratio is reflected by the inventory turnover
(Current Ratio (CR)), leverage (Debt To Equity Ratio (DER)) ratio. Inventory turnover is a ratio that measures the number
and activity (Inventory Turnover) on company value with of times inventory is sold or consumed in a given time
Corporate Social Responsibility (CSR) as the moderating period. It measures a company’s efficiency in managing its
variable and company size as the control variable. stock of goods.
Profitability ratio. A profitability ratio shows how well
2. Literature Review a company utilizes its assets to produce profit and value to
shareholders. Profitability ratios indicate a company’s ability
2.1. Firm Value to generate earnings against cost during a given period. The
ratios reveal how well a company is making use of its assets
Firm value is the investor’s perception of the success of to generate a profit. Return on assets (ROA) is a profitability
a company. This is reflected in the company’s share price. ratio that provides how much profit a company can generate
The increase in stock prices shows investor confidence in from its assets.
the company. They are willing to pay more to get a higher
profit. High stock prices can provide a good signal to attract 2.3. Corporate Social Responsibility
investors’ interest in making investment decisions (Ifada
et al., 2019). One of the ways to measure the value of shares Corporate Social Responsibility is (CSR) a management
is the Price Book Value (PBV). PBV is the ratio of the market concept whereby companies integrate social and
value of a company’s shares (share price) over its book value environmental concerns in their business operations and
of equity. The book value of equity, in turn, is the value of a interactions with their stakeholders. CSR is understood as
company’s assets expressed on the balance sheet. PBV ratio being the way through which a company achieves a balance
provides a valuable reality check for investors seeking growth of economic, environmental, and social imperatives, while
at a reasonable price and is often looked at in conjunction at the same time addressing the expectations of shareholders
with return on equity (ROE), a reliable growth indicator. The and stakeholders. In this sense, it is important to distinguish
higher PBV ratio causes the company value to be higher. CSR, which can be a strategic business management concept,
and charity, sponsorships, or philanthropy CSR disclosure
2.2. Financial Ratio is measured by the CSR disclosure index (CSRDI) which
refers to the global reporting initiative indicator (GRI). The
Four financial ratios can be used in analyzing a GRI indicator consists of three disclosure namely economic,
company’s financial statements (Brigham & Houston, 2010; environmental, and social as the basis for sustainability
El-Dalabeeh, 2013), namely: reporting. The GRI Standards create a common language for
organizations – large or small, private or public – to report on
Liquidity ratio. The ratio that describes the company’s their sustainability impacts consistently and credibly. This
ability to meet short-term obligations (debt). In this study, it enhances global comparability and enables organizations to
is proxied by the current ratio. The current ratio is a liquidity be transparent and accountable. The measurement of CSRDI
ratio that measures a company’s ability to pay short-term refers to Tan et al. (2016) who examined the effect of firm
obligations or those due within one year. It tells investors and size on corporate social responsibility (CSR) disclosure and
analysts how a company can maximize the current assets on its impact on investor reaction. The result reveals that firm
its balance sheet to satisfy its current debt and other payables. size has a significant effect on CSR disclosure.
This is a comparison between the total current assets and
liabilities owned by the company. 2.4. Firm Size
Solvency or Leverage ratio. According to Kasmir
(2016), the solvency ratio or leverage ratio is a ratio used Company size is a determinant of company profits.
to measure the extent to which the company’s assets are Companies with large assets will use the available resources
financed with debt. The leverage ratio is reflected by the as much as possible to generate maximum business profits
Debt to Equity Ratio (DER). The DER ratio compares a and companies with small assets will also generate profits
company’s total liabilities to its shareholder equity and can according to their resources. Company size can be expressed
be used to evaluate how much leverage a company is using. in terms of total assets, sales, and market capitalization.
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The proxy for company size is measured by the book value

of total assets. Due to the large value of the company’s
assets, it is calculated in millions of rupiah and converted
into a natural logarithm (Ln) (Hirdinis, 2019; Setiadharma
& Machali, 2017).

3. Methodology
In this research, we use correlational quantitative
statistical methods that measure the influence between two
Figure 1: Research Framework or more variables. Correlation analysis is a statistical method
used to evaluate the strength of the relationship between two
quantitative variables. A high correlation means that two or
Table 1: Hypothesis
more variables have a strong relationship with each other,
while a weak correlation means that the variables are hardly
Hypothesis Supporting Research related. The population of this research is all LQ45 index
companies listed on the Indonesia Stock Exchange from 2014
H1: Liquidity has an effect Batten and Vo (2019), to 2019. Researchers use purposive sampling when they want
on firm value Sondakh (2019) to access a particular subset of people, as all participants
of a study are selected because they fit a particular profile.
H2: Activities affect firm Nurlaela et al. (2019) and
The sampling technique used in this research was purposive
value Kristi and Yanto (2020)
sampling with the criteria that the company was still listed in
H3: Leverage affects firm Ibrahim and Isiaka (2020), the LQ45 index during the study period and had all the data
value Al-Slehat (2020) needed in the study. The data used in this research is secondary
data in the form of the company’s annual financial statements
H4: Profitability affects firm Tui et al. (2017), Paramitha obtained from www.idx.co.id. The method of data analysis in
value (2020)
this study used Multiple Linear Regression Analysis with the
H5: Liquidity affects firm Putra and Astika (2019), SPSS 18 Program. The operational definition of the variables
value with Corporate Rafid et al. (2017) in this study can be seen in Table 2.
Social Responsibility as
a moderating variable 4. Results
H6: Activities affect firm Santosa (2020), Kristi and The classical assumption test is a requirement that must be
value with Corporate Yanto (2020) met before performing multiple linear regression analysis. The
Social Responsibility as
classical assumption test is a statistical test used to determine
a moderating variable
the relationship between variables, including multicollinearity
H7: Leverage affects firm Wulandari and Wiksuana test, heteroscedasticity test, autocorrelation test, normality
value with Corporate (2017), Itsnaini and test, and linearity test The results of the calculations from the
Social Responsibility as Subardjo (2017) classical assumption test can be described as follows:
a moderating variable
4.1. Classical Assumption Test
H8: Profitability affects firm Siregar et al. (2018),
value with Corporate Winarso and Christina.
4.1.1. Normality Test
Social Responsibility as (2019)
a moderating variable
The normality test uses the Kolmogorov-Smirnov test,
H9: Liquidity, Activity, Luthfiah and Suherman namely if the significance value is >0.05, the regression
Leverage, and (2018), Fajaria and Isnalita model is normally distributed. The Kolmogorov-Smirnov
Profitability affect firm (2018) test is used to decide if a sample comes from a population
value with Corporate with a specific distribution, that is, it is commonly used as a
Social Responsibility as test for normality to see if your data is normally distributed.
a moderating variable The results of the normality test state that the variables
and Company Size as studied were normally distributed because of the significance
a control variable value (0.318 > 0.05).
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Journal of Asian Finance, Economics and Business Vol 8 No 3 (2021) 0423–0431 427

Table 2: Operational Definition of Variables

Variable Definition Formulas

Firm Value investors’ assessment of how well the company is performing which Market price per share
is often related to stock prices PBV =
Book value per share
EMV  D
Tobins Q 
EBV  D
Total Earnings
EPS =
Outstanding Shares

Liquidity the company’s ability to meet its short-term debt (maturities of less Current Asset
than one year) using current assets CR =
Current Liabilities

Activity measure the effectiveness of the company’s activities in utilizing its Cost of Goods Sold
inventory to generate sales ITO =
Average Inventory

Leverage the large or small amount of debt used by a company that is used Total Debt
to finance its operational activities DER =
Total Equity

Profitability The level of net profit that can be achieved by the company when Earning After Tax(EAT )
running its operations. ROA =
Total Asset

CSR The responsibility of the company as an impact of a decision and

activities in the community and the environment, as measured by CSRDI j 
X ij

the corporate social disclosure index (CSDI) nij

Firm Size The size of the total assets owned by the company Firm Size = Ln (Total Asset)

4.1.2. Multicollinearity Test 4.1.3. Heteroscedasticity Test

The multicollinearity test aims to test the correlation If there is a particular pattern in the SPSS Scatterplot
between independent variables in the regression model. Graph, such as the points that form a regular pattern,
VIF to measure multicollinearity ranges between 1 and 2 it can be concluded that there has been a problem of
indicating the absence of multicollinearity. Multicollinearity heteroscedasticity. Conversely, if there is no clear pattern, and
is a problem in regression analysis that occurs when two spreading dots, then the indication is no heteroscedasticity
independent variables are highly correlated. The relationship problem. The scatter plot test also reveals a random position
between the independent variables and the dependent of each data, signifying the no heteroskedasticity in the data.
variables is distorted by the very strong relationship between Heteroscedasticity testing was carried out using a scatter
the independent variables, leading to the likelihood that our plot. The results of the heteroscedasticity test show a clear
interpretation of relationships will be incorrect. pattern and dots spread above and below the number 0 on
Variance inflation factor (VIF) is a measure of the the Y axis, meaning that there is no heteroscedasticity in the
amount of multicollinearity in a set of multiple regression regression model. Some data appear to be clustered due to the
variables. Values of VIF that exceed 10 are often regarded large number of data studied. This shows that the regression
as indicating multicollinearity, but in weaker models values model in this study is suitable for use.
above 2.5 may be a cause for concern. The multicollinearity
test results show that there are no independent variables that 4.1.4. Autocorrelation Test
have a Tolerance value of more than 0.10. The results of the
calculation of the VIF value show there are no independent The Durbin Watson Test is a measure of autocorrelation.
variables that have a VIF value of more than 10. So, it can The Durbin-Watson statistic will always have a value between
be concluded that there is no multicollinearity between the 0 and 4. Values from 0 to less than 2 indicate positive autocorre­
independent variables in this regression model. lation and values from 2 to 4 indicate negative autocorrelation.
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The autocorrelation test aims to determine whether or not 4.3. Hypothesis Testing
there is a correlation deviation that occurs between the residual
period t and period t-1 (previous). The autocorrelation test 4.3.1. Direct Effect
method uses the Durbin Watson test. The results from the
autocorrelation test show that the Durbin-Watson value is Based on Table 3 it can be seen that direct testing of
1,964, the dU value is 1.80622, the dL value is 1.58322, and hypotheses 1 to 4 is accepted as they have a significant effect.
the 4–dU value = 2.24. The results of the Durbin-Watson test Financial ratios as reflected by 4 indicators, namely liquidity,
show that the value of dU < dW < 4–dU = 1.80622 < 1.964 activity, leverage, and profitability affect firm value. Liquidity
< 2.19378, so it means that autocorrelation does not occur in has a positive effect on firm value, which means that the higher
this regression model. the liquidity ratio of a company, the higher the company’s
liabilities that are borne by current assets, thus increasing
4.2. Multiple Linear Regression Analysis public confidence. The results of this study indicate that there
is a positive effect of liquidity on firm value which is supported
The data process uses multiple linear regression analysis by research conducted by Nguyen et al. (2016), Rizki et al.
which aims to measure the strength of the relationship (2018), and Sondakh (2019). The firm value variable is also
between two or more variables. Based on the results of data influenced by the activity variable. The results of this research
processing using SPSS version 18.0 software, the results are can be concluded that there is a positive influence between the
as shown in table 3 below: activity ratios and firm value, so that if the company has a high
From the results of multiple linear regression analysis activity ratio, the better the value of the company. This result
in table 3 above, it can be seen that the multiple regression is supported by research conducted by Nyeadi et al. (2018),
equation is as follows: Santosa (2020), and Kristi and Yanto (2020).
The firm value that is formed through stock market
Firm Value = – 7.521 + 0.070 ROA + 0.488 CR value is affected by investment opportunities that are
+ 0.020 ITO + 0.320 DER + 2.516 CSRI considered by potential investors. A leverage ratio is one of
– 0.759 ROA*CSRI – 0.030 CR*CSRI several financial measurements that assesses the ability of a
+ 0.563 ITO*CSRI + 0.168 DER*CSRI + e company to meet its financial obligations. A good leverage
ratio will affect public confidence in a company, thereby
Firm Value = – 6.452 + 0.049 ROA + 0.400 CR increasing company value. The results of this study indicate
+ 0.019 ITO + 0.325 DER + 1.769 CSRI that there is a positive influence between leverage and firm
– 0.635 ROA*CSRI – 0.028 CR*CSRI value, therefore, the higher the leverage ratio, the higher
+ 0.497 ITO*CSRI + 0.149 DER*CSRI the firm value. These results are supported by research
+ 0.040 SIZE + e conducted by Adenugba et al. (2016) and Santosa (2020).

Table 3: Results of Multiple Linear Regression Analysis

Without Control Variable With Control Variable

Variable Coefficient t Sig. Coefficient t Sig. Description
(Constant) −7.521 −4.206 0.000 −6.452 −3.636 0.000
ROA 0.070 13.886 0.000 0.049 5.419 0.000 Significant
CR 0.488 5.057 0.000 0.400 4.067 0.000 Significant
ITO 0.020 2.019 0.046 0.019 2.059 0.042 Significant
DER 0.320 5.600 0.000 0.325 5.868 0.000 Significant
CSRI 2.516 6.179 0.000 1.769 3.712 0.000 Significant
ROA x CSRI −0.759 −4.718 0.000 −0.635 −3.919 0.000 Significant
CR x CSRI −0.030 −2.926 0.004 −0.028 −2.788 0.006 Significant
ITO x CSRI 0.563 2.549 0.012 0.497 2.308 0.023 Significant
DER x CSRI 0.168 3.115 0.002 0.149 2.813 0.006 Significant
SIZE − − − 0.040 2.789 0.006 Significant
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Journal of Asian Finance, Economics and Business Vol 8 No 3 (2021) 0423–0431 429

The financial performance of a company is described as high 4.3.2.2. Hypothesis Testing with Control Variable
ROA an indicator of how profitable a company is relative
Based on Table 3, it can be seen that company size as
to its total assets. ROA gives a manager, investor, or analyst
a control variable has a coefficient value of 0.040 with a
an idea as to how efficient a company’s management is at
probability value of 0.006 smaller than 0.05. It can be con­
using its assets to generate earnings. The results of this study
cluded that company size has a positive and significant effect at
indicate that there is a positive effect of ROA on firm value,
a 5% significance level. This is in line with research conducted
therefore, the higher the ROA, the higher the firm value.
by Rudangga and Sudiarta (2016) who stated that company
The same thing was expressed in research conducted by
size has a significant positive effect on firm value. This result
Fajaria and Isnalita (2018), Tui et al. (2017), and Sari and
is also in accordance with the signaling theory which states that
Sedana (2020).
the company has a positive influence on firm value. Companies
4.3.2. Indirect Effect with high total assets indicate that the company has positive
cash flow and has good prospects for a relatively long period
4.3.2.1. Hypothesis Testing with Moderating Variable of time. Firm size as a control variable weakens the effect
of profitability, liquidity, activity, and CSR on firm value as
Based on Table 3, the results state that CSR is proven indicated by a decrease in the coefficient. In terms of leverage
to mediate the effect of the financial ratio on firm value. on firm value, the role of company size as a control variable is
CSR disclosure is expected to give a positive impression strengthening based on an increasing coefficient.
to investors, that the company shows its concern for the
environment and society. The higher the current ratio 5. Conclusion
(CR), the higher the company’s ability to pay off its short-
term obligations. A high level of liquidity will increase the This study aims to examine the effect of liquidity, activity,
demand for shares and this will increase company value. This leverage, and profitability on firm value, as well as the
research is supported by the results of research conducted by effect of disclosure of corporate social responsibility (CSR)
Rafid et al. (2017), Putra and Astika (2019). which in this study is a moderator and firm size as a control
The greater the activity ratio, the more efficient the use variable. Based on data analysis and discussion of 22 sample
of all company assets in generating profits. High profits companies listed on the LQ45 index from 2014–2019, it
will attract investors to invest, thereby increasing the firm can be concluded that the liquidity, activity, leverage, and
value. The existence of CSR has a very important role in profitability ratios are significant to firm value in accordance
increasing company value as a result of increasing company with the initial hypothesis of the study.
sales because of conducting various social activities in Statistical results and discussion of the role of CSR as a
the surrounding environment. The results of the research moderating variable found that CSR can moderate the effect
reinforce the research conducted by Nyeadi et al. (2018) of liquidity, activity, leverage, and profitability on firm
Santosa et al. (2020), and Kristi (2020). value. The effect of CSR as a Quasi-Moderating variable
Based on the signal theory, companies with good quality on the effect of the ratios of profitability and liquidity on
will deliberately give signals to the market, thus the market firm value, CSR as a moderating variable can strengthen the
is expected to differentiate between good and bad quality effect of activity and leverage on firm value.
companies. Even though the level of debt owned by the The firm size variable acts as a control variable on the
company is high, there is a good relationship between the effect of liquidity, activity, leverage, and profitability on firm
company and debtholders and the company is able to increase value with CSR as a moderating variable.
company value. This research is supported by the results of
research conducted by Wulandari and Wiksuana (2017) who
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