Financial performance and systematic risk as determinants of firm value: A panel fixed-effects analysis of Indonesian property and real estate issuers, 2015-2025
Abstract
The BI Rate fell to a pandemic-era low of 3.50% in 2021 before rising to 6.25% during the tightening cycle, straining the credit-dependent property sector. This study re-examines how profitability (ROA), leverage (DER), liquidity (CR), and systematic risk (Beta) relate to firm value (PBV) for 12 IDX-listed property firms over 2015–2025 (132 firm-year observations), explicitly testing the panel structure—unlike most prior studies that rely solely on pooled OLS. A Breusch–Pagan LM test rejects pooled OLS (χ² = 103.15, p < 0.001), and a Hausman test favors fixed effects (FE) over random effects (χ²(4) = 11.82, p = 0.019). Under FE with firm-clustered standard errors, only ROA remains positive and significant across all specifications; DER, CR, and Beta lose significance after clustering—though DER's coefficient is consistently larger under FE, shifting from near-zero under pooled OLS to positive and economically meaningful once firm heterogeneity is controlled for. Adding COVID-19 (2020–2021) and post-pandemic tightening (2022–2024) period dummies raises within R² from 23.8% (pooled OLS) to 44.5%, with both dummies negative and highly significant—directly linking the BI Rate narrative to the estimated model. Profitability appears to be the fundamental most consistently priced by the market in this sector, but firm value is also substantially shaped by macro-financial regime shifts that a static OLS model cannot capture. Given the limited number of cross-sectional clusters (12 firms) and remaining within-firm serial correlation, these results should be interpreted with caution.