The Role of Dividend Policy in Mediating Financial Profit Ability and Infrastructure Firm Value

Abstract

This research investigates dividend policy's mediating role between profitability and firm value in Indonesian infrastructure companies during 2019-2023. Employing purposive sampling, 10 companies were selected from Indonesia Stock Exchange listings, yielding 50 observations. Data analysis utilized WarpPLS version 8.0 through Structural Equation Modeling-Partial Least Square methodology. Firm value was measured using Tobin's Q, liquidity through Current Ratio, solvency via Debt-to-Assets Ratio, profitability through Return on Assets, and dividend policy using Growth-Committed Corporate Dividend Policy. Results demonstrate that liquidity negatively and significantly affects firm value, while solvency and profitability show negative but insignificant effects. Profitability positively and significantly influences dividend policy. Notably, dividend policy completely mediates profitability's effect on firm value and exhibits positive significant direct effects on firm value, supporting residual dividend theory applications in infrastructure sector contexts.