From Financial Structure to Market Valuation: The Mediating Role of Return on Equity in Indonesia’s Processed Food Industry (2020–2024)

Abstract

This study examines the effects of Debt to Equity Ratio (DER), Total Asset Turnover (TATO), and Current Ratio (CR) on stock prices, with Return on Equity (ROE) as an intervening variable, in processed food sub-sector companies listed on the Indonesia Stock Exchange during 2020–2024. The study uses a quantitative approach with path analysis and panel-data regression estimated using EViews. The sample was selected through purposive sampling and consists of 11 companies observed for five years, resulting in 55 balanced panel observations. The results show that DER has no significant effect on ROE or stock prices. TATO has a positive and significant effect on ROE, but no significant direct effect on stock prices. CR has no significant effect on ROE, but has a positive and significant effect on stock prices. ROE has a positive and significant effect on stock prices. The Sobel test indicates that ROE mediates the effect of TATO on stock prices, while it does not mediate the effects of DER or CR. These findings indicate that asset-use efficiency and profitability are important channels in explaining stock-price movements, while liquidity is reflected more directly in market valuation.