THE EFFECT OF MACROECONOMIC FACTOR, EARNING MANAGEMENT AND FINANCIAL RISK ON FIRMS' VALUE: AN EMPIRICAL ANALYSIS OF LISTED COMMERCIAL BANKS

Abstract

Numerous economic aspects, earnings management, and risk considerations impact the value of the banking sector, and academics must pay close attention to this element. This article aims to examine the effect of macroeconomic factors, earnings management such as return on assets (ROA) and return on equity (ROE), and financial risks such as credit and liquidity risks on the firm value of listed commercial banks in Indonesia. From 2011 to 2020, secondary data from the Bank of Indonesia were collected for the study. The study adopted the fixed-effect model (FEM) to examine the link between the variables and the robust standard error to examine the relationships between the variables. According to the results, the interest rate, ROA, and ROE favorably affect the firm value of Indonesian commercial banks that are publicly traded. The data also revealed a negative relationship between credit risk and liquidity risk and the firm value of Indonesian commercial banks that are publicly traded. The article aids policymakers in formulating policies for raising the value of banks by improving earnings management and minimizing financial risk.