THE DRIVERS OF FIRM VALUE IN THE INDONESIAN PROPERTY AND REAL ESTATE INDUSTRY: A MACROECONOMIC AND FINANCIAL PERSPECTIVE

• Main Author: Devania Yurisafira, Olivia
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/79690
• Institution: Institut Teknologi Bandung

Indonesian property and real estate market is one of the most significant and dynamic in Southeast Asia due to the country's rapid economic growth and the large and growing size of its property and real estate market. However, property and real estate industries are also characterized by high volatility despite a substantial impact on Indonesia's economic growth. In recent years, the industry has faced challenges, especially during the COVID-19 pandemic, due to the sluggish property market. This study investigates the relationship between macroeconomic factors, firm financial position, and firm value in Indonesian property and real estate companies from 2017 to 2022. This study aims to bridge the gap in existing research by examining how macroeconomic parameters, such as GDP growth, inflation rates, and interest rates, and financial aspects, such as profitability and leverage, correlate to this industry's value over a given period. The research methods for this study are secondary data with statistical analysis, with Tobin's Q representing firm value acting as the dependent variable. At the same time, independent variables are measured by Indonesia's GDP growth, inflation, and interest rates. At the same time, profitability is measured by Return on Asset (ROA) and Return on Equity (ROE), and Debt measures leverage to Equity Ratio (DER). The study analyses 162 observations from 27 listed property and real estate companies using panel data regressions. The empirical findings demonstrate that property and real estate firms have the potential to enhance their overall performance and increase shareholder value by considering the interconnectedness of economic conditions and the financial position of the firm. Profitability emerges as a significant predictor of firm value, while the selected macroeconomic factors have significant and insignificant effects on the valuation of firms. On the other hand, since this industry has substantial leverage, this variable does not affect firm value. This study also highlights that the critical component that drives the evaluation of a firm's value is heavily influenced by the specifics of the industry and the regulatory framework in which the business operates. Industry stakeholders can contribute to the sector's overall stability and long-term growth by understanding and adopting these concerns into decision-making processes; industry participants can contribute to the sector's overall stability and long-term growth.