THE EFFECT OF DIVIDEND POLICY, PROFITABILITY, LIQUIDITY TOWARDS FIRM VALUE WITH COST OF DEBT AS AN INTERVENING VARIABLE: A STUDY OF JAKARTA ISLAMIC INDEX COMPANIES

Abstract

This study aims to analyze the effect of dividend policy, profitability, and liquidity on firm value with the cost of debt as an intervening variable in companies consistently listed in the Jakarta Islamic Index (JII) during 2013–2023. The independent variables in this study are Dividend Payout Ratio, Profitability, and Liquidity, while the dependent variable is Firm Value, with Cost of Debt as a mediating variable. Panel regression methods are used with fixed and random effects models and the Sobel test to examine the mediation effect. The results show that partially, only profitability has a significant adverse impact on the cost of debt, while the Dividend Payout Ratio and liquidity do not have a considerable effect. Simultaneously, the Dividend Payout Ratio, profitability, and liquidity do not significantly affect the cost of debt. Moreover, the cost of debt does not successfully mediate the relationship between the Dividend Payout Ratio, profitability, and liquidity on firm value. This study recommends that companies listed in the J.I.I. focus more on improving profitability to reduce the cost of debt and increase firm value overall.