The Effect of Diversification of Revenue, Profitability, and Firm Size on the Value of Banking Companies

Abstract

This research investigates how revenue diversification, profitability, and firm size influence banking company valuations listed on the Indonesia Stock Exchange during 2020-2023. Employing quantitative methodology with secondary data from 144 banking institutions selected through purposive sampling, multiple linear regression analysis was conducted using SPSS 26. Grounded in signaling theory, this investigation examines fundamental variables as signals communicating company prospects to investors. Results indicate revenue diversification demonstrates insignificant negative effects on firm value, profitability exhibits significant positive impacts, while firm size shows significant negative influences. Simultaneously, these three variables significantly affect firm value, with adjusted R² reaching 55.1%. These findings advance signal theory development and offer practical implications for investors and bank management regarding corporate value enhancement strategies within Indonesia's banking sector during critical economic periods.