Do Profitability and Investment Opportunities Signal Firm Value? Evidence From Indonesia’s Consumer Non-Cyclicals Sector

Abstract

This research investigates how profitability, measured through Return on Assets (ROA), and Investment Opportunity Set, assessed via Market Value to Book Value of Equity (MVBVE), influence Firm Value as indicated by Price to Book Value (PBV). The study addresses fluctuations in firm value driven by profitability metrics and investment opportunity set. Employing a quantitative methodology with a causal-comparative design, the research utilized secondary data from 125 consumer non-cyclical enterprises listed on the Indonesia Stock Exchange between 2019 and 2023. Through purposive sampling, 36 companies were selected, and analysis was conducted using PLS-SEM methodology via WarpPLS 8.0 software. Results demonstrate that both profitability and investment opportunity sets exert positive and statistically significant impacts on firm value. This study enhances signaling theory understanding within Indonesia's capital market framework.