The Effect of Profitability on Firm Value With GCG as Mediator in Telecommunication Companies

Abstract

This study examines the mediating role of effective corporate governance in the relationship between profitability and firm value in Indonesian telecommunication companies. Using purposive sampling methodology, we analyzed 18 telecommunications companies listed on the Indonesia Stock Exchange (IDX) during 2019-2023, resulting in 54 observations. The analysis employed PLS-SEM using WarpPLS 8.0 software. Our findings reveal that profitability (ROA), firm size (LnTA), and dividend policy (DPR) demonstrate significant positive effects on firm value (Tobin's Q). Additionally, profitability exhibits a significant positive influence on effective corporate governance. The mediation analysis confirms that excellent corporate governance successfully mediates the relationship between profitability and firm value. These results provide empirical evidence supporting signaling theory and agency theory in emerging market contexts.