Almana : Jurnal Manajemen dan Bisnis Volume 9 No.
2/ August 2025: 316-323 p-ISSN: 2579-4892/ e-ISSN: 2655-8327 DOI: 10.
36555/almana.
The Effect of Profitability on Firm Value: The Role of Firm Size and Economic Crisis .
8Ae2.
Yosep Rahman Hidayat*1.
Endang Mahpudin2.
Mayasari1 Universitas Pendidikan Indonesia.
Indonesia1.
Universitas Singaperbangsa Karawang.
Indonesia 2 *Coresponding Email: y_r_hidayat@upi.
Abstract: Profitability is a key indicator of a companyAos financial performance, influencing investor confidence and market valuation.
However, its effect on firm value may vary depending on internal characteristics and external economic This study aims to analyze the effect of profitability on firm value by examining the moderating roles of firm size and economic crisis.
Using a quantitative approach with moderated regression analysis, the research utilizes panel data from 2,050 companies listed in the Forbes Global 2000 during 2008Ae2024, resulting in 33,963 firm-year observations across multiple sectors and countries.
Firm value is measured by market value .
og-transforme.
, profitability by return on assets (ROA), and moderating variables include firm size and economic crisis, both measured as dummy variables.
The results show that profitability significantly affects firm value, with a stronger impact for larger firms and a weaker impact during economic Interaction analysis reveals that high profitability mitigates the negative effects of crises on firm value, indicating its role as a resilience factor.
These findings highlight that the profitabilityAefirm value relationship is contingent upon both internal attributes and macroeconomic conditions, offering insights for managers and investors in aligning strategic decisions with organizational capacity and prevailing economic environments.
Article History:
Submitted: July 03, 2025 Revised: August 11, 2025 Accepted: August 14, 2025 Published: 27 August, 2025 Keywords:
Economic Crises Firm Value Firm Size Moderated Regression Profitability Hidayat.
Mahpudin.
, & Mayasari.
The Effect of Profitability on Firm Value: The Role of Firm Size and Economic Crisis .
8Ae2.
Almana : Jurnal Manajemen dan Bisnis, 9.
, https://doi.
org/10.
36555/almana.
INTRODUCTION
Profitability is a fundamental indicator of a firmAos financial health, reflecting its efficiency in managing resources to generate earnings.
Data from the Forbes Global 2000 reveal substantial fluctuations in firm value, profitability, and assets during 2008Ae2024.
Firm value stood at 38,238.
43 in 2008, dropped sharply to 9,783.
82 in 2009 due to the global financial crisis, and fluctuated before peaking at 44,204.
77 in 2024.
This work is licensed under a Creative Commons Attribution-NonCommercialNoDerivatives 4.
0 International License.
https://creativecommons.
org/licenses/by-nc-nd/4.
Almana : Jurnal Manajemen dan Bisnis p-ISSN: 2579-4892 e-ISSN: 2655-8327 Value Figure 1.
Trends in Firm Value .
8Ae2.
Source: Processed data from Forbes Global 2000 .
8Ae2.
Aggregate profitability also fell from 2,500.
66 in 2008 to 815.
76 in 2009, hitting its lowest point in 2010 .
and peaking in 2022 .
,500.
Profits Figure 2.
Trends in Profitability .
8Ae2.
Source: Processed data from Forbes Global 2000 .
8Ae2.
Meanwhile, total assets as a measure of firm size declined from 117,114.
22 in 2008 to 62,300.
70 in 2009, then increased steadily to 119,091.
30 in 2024.
The Effect of Profitability on Firm Value: The Role of Firm Size and Economic Crisis .
8Ae2.
Yosep Rahman Hidayat*1.
Endang Mahpudin2.
Mayasari1 Almana : Jurnal Manajemen dan Bisnis Volume 9 No.
2/ August 2025: 316-323 Figure 3.
Trends in Assets .
8Ae2.
Source: Processed data from Forbes Global 2000 .
8Ae2.
The 2008Ae2024 period encompasses several global crises that significantly affected corporate performance and valuation.
The 2008Ae2009 global financial crisis triggered sharp declines in firm value, profitability, and assets.
The 2011Ae2012 Eurozone debt crisis and the 2018Ae2019 USAeChina trade war created market uncertainty and slowed growth.
The COVID-19 pandemic in 2020 represented the most severe shock of the past decade, followed by the 2022 global energy and food crisis due to the RussiaAeUkraine war.
Ongoing inflationary pressures and global monetary tightening in 2023Ae2024 continued to weigh on markets, despite partial recovery in some sectors.
This chronology highlights that external factors, particularly global economic crises, are key moderators in the profitabilityAefirm value Previous studies, such as Gautama et al.
and Yanah & Sufiyati .
, have found that profitability positively influences firm value by sending positive signals to the However, this relationship is not always linear or stable.
During crises, heightened market uncertainty can make investor perceptions more volatile, potentially weakening or reversing the effect of profitability on firm value (Choi & Wang, 2023.
Hanen et al.
, 2.
Firm size is another important factor that can moderate this relationship.
Larger firms generally possess greater resources, broader diversification, and stronger credibility in capital markets, enabling them to leverage profitability more effectively to sustain or enhance market value (Berger & Udell, 2023.
Yanah & Sufiyati, 2.
Nevertheless, there is limited research that simultaneously examines the moderating roles of firm size and economic crisis using long-term, multi-sector, cross-country data (Hirdinis, 2024.
Khuong & Anh, 2.
From the perspectives of signaling theory and contingency theory, the impact of profitability on firm value depends on both internal firm attributes and external economic However, empirical evidence integrating these perspectives remains scarce.
Many previous studies employ cross-sectional designs, limiting their ability to capture the longitudinal dynamics of these relationships.
This creates a theoretical gap that must be addressed to provide more robust guidance for decision-making in dynamic business Accordingly, this study aims to investigate the effect of profitability on firm value by incorporating the moderating roles of firm size and economic crisis, using panel data across multiple sectors and countries over the period 2008Ae2024.
The findings are expected to contribute theoretically to corporate finance literature and practically to managerial and investment decision-making by aligning strategies with firm characteristics and prevailing macroeconomic conditions.
Website: http://journalfeb.
id/index.
php/almana/article/view/2881 Almana : Jurnal Manajemen dan Bisnis p-ISSN: 2579-4892
e-ISSN: 2655-8327
METHODS
The population of this study consists of companies listed in the Forbes Global 2000 during the period 2008Ae2024.
From this population, firms were selected based on the availability of complete annual data on market value, return on assets (ROA), and firm size classification for the entire observation period.
After applying these criteria, the final sample comprised 2,050 unique companies from various sectors, resulting in 33,963 firm-year The sample covers manufacturing, financial, technology, energy, and consumer goods firms, representing both developed and emerging markets.
This research employs a quantitative approach using Moderated Regression Analysis (MRA), which is an extension of multiple linear regression suitable for testing the moderating effects of firm size and economic crisis on the relationship between profitability and firm Data were obtained through documentation and secondary data processing from the Forbes Global 2000.
The variables in this study are defined as follows:
- Dependent variable: Firm value, measured by market value and transformed using the natural logarithm.
- Independent variable: Profitability, measured by Return on Assets (ROA) in ratio - Moderating variables:
Firm size .
ummy variable: 1 = large firm, 0 = small fir.
Global economic crisis .
ummy variable: 1 = crisis year, 0 = non-crisis yea.
The moderated regression model is specified as follows:
LOG_VALUE_it = 0 1 ROA_it 2 SIZE_DUMMY_it 3 CRISIS_DUMMY_it 4 (ROA_it y SIZE_DUMMY_i.
5 (ROA_it y CRISIS_DUMMY_i.
A_it Where:
- LOG_VALUE_it = Firm value in logarithmic form for firm i in year t.
- ROA_it = Profitability (Return on Asset.
for firm i in year t.
- SIZE_DUMMY_it = Dummy variable for firm size .
= large, 0 = smal.
- CRISIS_DUMMY_it = Dummy variable for global economic crisis .
= crisis year, 0 = non-crisis yea.
- 0 = Constant term.
- 1Ae5 = Regression coefficients.
- A_it = Error term.
Expected Signs of Coefficients:
- 1 > 0: Higher profitability is expected to increase firm value.
- 2 > 0: Larger firms are expected to have higher firm value.
- 3 < 0: Economic crises are expected to reduce firm value.
- 4 > 0: The positive effect of profitability on firm value is expected to be stronger for larger firms.
- 5 > 0: Profitability is expected to mitigate the negative effect of economic crises on firm value.
The Effect of Profitability on Firm Value: The Role of Firm Size and Economic Crisis .
8Ae2.
Yosep Rahman Hidayat*1.
Endang Mahpudin2.
Mayasari1 Almana : Jurnal Manajemen dan Bisnis Volume 9 No.
2/ August 2025: 316-323 Firm size Profitability Firm value Economic crisis Figure 4.
Research Framework: The Effect of Profitability on Firm Value with Firm Size and Economic Crisis as Moderating Variables Source: AuthorAos illustration .
RESULTS AND DISCUSSION Table 1.
Model Summary of Moderated Regression Analysis (MRA) Model R R SquareAdjusted R SquareStd.
Error of the Estimate Source: SPSS Output, processed by authors .
The R value of 0.
424 indicates a moderate positive correlation between the set of predictors .
rofitability, firm size, crisis dummy, and their interaction term.
and firm value.
The R Square of 0.
180 means that 18% of the variation in firm value is explained by the Although this may seem modest, it is common in financial models given the complexity of firm valuation, which is influenced by numerous non-financial factors.
The Adjusted R Square being the same as R Square confirms that the modelAos explanatory power is stable and not inflated by irrelevant variables.
Table 2.
ANOVA Results of Moderated Regression Analysis Model Sum of Squares df Mean Square Sig.
Regression9,425.
1,885.
1,487.
Residual 43,020.
33,9571.
Total 52,446.
33,962
Source: SPSS Output, processed by authors .
The ANOVA table shows that the regression model is statistically significant (F = 1,487.
966, p < 0.
This means that the independent and moderating variables collectively explain a significant portion of the variation in firm value.
Website: http://journalfeb.
id/index.
php/almana/article/view/2881 Almana : Jurnal Manajemen dan Bisnis p-ISSN: 2579-4892 e-ISSN: 2655-8327 Table 3.
Coefficients of Moderated Regression Analysis Variable B Std.
Error Beta Sig.
Expected Sign Constant Ai 000Ai Profitability (ROA) 000( ) Firm Size (Dumm.
000( ) Economic Crisis (Dumm.
000(O.
ROA y Size
000( )
ROA y Crisis 013( ) Source: SPSS Output, processed by authors .
Interpretation and Discussion The results show that profitability (ROA) has a negative and statistically significant effect on firm value (B = -0.
043, p < 0.
This finding contradicts the expected positive relationship stated in signaling theory, which posits that higher profitability should convey positive signals to the market, thereby increasing firm valuation.
Similar anomalies have been observed in emerging markets, where high accounting profitability may be associated with earnings management practices or perceived risks that reduce investor confidence (Wijaya & Wibowo, 2.
This suggests that, in certain contexts, investors may discount profitability metrics when they perceive them as less reliable or disconnected from cash flow Firm size has a positive and significant impact on firm value (B = 0.
175, p < 0.
supporting both the contingency theory and prior empirical evidence (Berger & Udell, 2023.
Chen et al.
, 2.
Larger firms typically have greater operational stability, more diversified revenue streams, and better access to capital markets, which enhance their resilience and attractiveness to investors.
The economic crisis variable exerts a negative and significant influence on firm value (B = -0.
119, p < 0.
, aligning with studies by Irawan & Salim .
and Hamzah et al.
, which highlight that macroeconomic shocks reduce investor sentiment and market This is consistent with contingency theory, which acknowledges that external environmental factors, such as global crises, can disrupt the typical financial performanceAe valuation relationship.
The interaction between profitability and firm size is both strong and positive (B = 947, p < 0.
, indicating that the positive impact of profitability on firm value is amplified in larger firms.
This finding supports the argument of Kumar & Singh .
that scale advantages, market reputation, and resource endowments enable large firms to convert profitability into sustained market value more effectively than smaller firms.
Finally, the interaction between profitability and economic crisis is positive and significant (B = 0.
096, p = 0.
, though with a smaller effect size.
This suggests that profitability can act as a buffer during crises, mitigating their adverse effects on firm This result is consistent with the findings of Hamzah et al.
, who argue that firms with strong profitability and liquidity are better equipped to maintain investor confidence in turbulent times.
Overall, these findings provide empirical support for the application of both signaling theory and contingency theory in explaining firm value determinants.
Profitability remains an important driver, but its influence is contingent upon firm-specific characteristics .
and macroeconomic conditions .
These results highlight the need for managers to align financial strategies with both internal capacities and external realities to optimize firm The Effect of Profitability on Firm Value: The Role of Firm Size and Economic Crisis .
8Ae2.
Yosep Rahman Hidayat*1.
Endang Mahpudin2.
Mayasari1 Almana : Jurnal Manajemen dan Bisnis Volume 9 No.
2/ August 2025: 316-323
CONCLUSION
This study concludes that profitability significantly influences firm value, with the effect being amplified in larger firms and diminished during periods of economic crisis.
Firm size strengthens the positive impact of profitability on firm value, while economic crises generally weaken it.
Nevertheless, profitability serves as a partial buffer against the adverse effects of crises.
These results confirm that the profitabilityAefirm value relationship is contingent upon both internal firm characteristics and external macroeconomic conditions, emphasizing the need for managers and investors to align strategic decisions with firm size and prevailing economic circumstances.
REFERENCES