The Effect of Profitability and Growth Opportunity on FirmValue in Companies Listed in the Jakarta Islamic Index (JII)

Abstract

Purpose This study aims to re-examine the influence of profitability and growth opportunity on the value of companies in Islamic companies listed in the Jakarta Islamic Index (JII). This study is motivated by the phenomenon of fluctuations in company value and inconsistency in the results of previous research findings (research gap) regarding factors that affect company value in the Indonesian sharia capital market.

Design/methodology/approach This study uses a quantitative approach with secondary data sourced from the company's annual report. The research population is all companies listed in the Jakarta Islamic Index (JII) for the 2022-2024 period. Using the purposive sampling technique, a sample of 23 companies that met the criteria was obtained. The data analysis technique used was panel data regression analysis with the help of EViews 9 software. Based on a series of model tests (Chow Test, Hausman Test, and Lagrange Multiplier Test), the Random Effect Model (REM) model was selected as the best estimation model.

Findings The results of the study show that partially, profitability has a positive and significant effect on the value of the company, which supports the signal theory where high profits become a positive signal for investors. Likewise, growth opportunities have been proven to have a positive and significant effect on the company's value, in line with agency theory where management's ability to manage expansion opportunities increases shareholder confidence. Simultaneously, the variables of profitability and growth opportunity were able to explain the variation in company value (PBV) of 13.14%, while the rest was explained by other factors outside the study.

Research limitations/implications This study has limitations on the relatively low Adjusted R-Square value (13.14%), indicating the presence of other important variables that are not included in the model. The practical implications of this research are for the management of companies at JII to continue to maintain profitability stability and optimize assets for growth opportunities to increase market valuation. For investors, these results emphasize that ROA indicators and asset growth are crucial signals in investment decision-making in Islamic stocks.

JEL : G32, G11, M41