PROFITABILITY, LEVERAGE, AND DIVIDEND POLICY ON STOCK VALUATION IN THE CONSUMER AND AGRIBUSINESS SECTORS, INDONESIA STOCK EXCHANGE 2021–2024

Irma Fitriyah; Anna Retnawati

doi:10.29303/jaa.v11i1.869

Authors

Irma Fitriyah Universitas Airlangga
Anna Retnawati Universitas Airlangga

DOI:

https://doi.org/10.29303/jaa.v11i1.869

Keywords:

dividend policy, price-to-earnings ratio, random effects, stock valuation, unbalanced panel data

Abstract

Investors in the consumer and agribusiness sectors of the Indonesia Stock Exchange (IDX) appear to weigh dividend policy more heavily than profitability or leverage when valuing stocks. Using unbalanced panel data from 17 companies (66 firm-year observations) over 2021-2024, a post-pandemic recovery period, this study tests the effect of Return on Assets (ROA), Debt-to-Equity Ratio (DER), and Dividend Payout Ratio (DPR) on stock valuation proxied by the Price-to-Earnings (P/E) Ratio. Model selection tests (F-test, Hausman, Breusch-Pagan LM) identify Random Effects as the best estimator, with HC3 Robust Standard Errors used for all inferences given the unbalanced panel structure. Among the three variables, only DPR shows a significant positive effect on P/E (Î² = 12.270; p = 0.004), consistent with Bird-in-the-Hand theory: investors prefer the certainty of cash dividends over uncertain capital gains. ROA and DER show no significant effect after correcting for heteroscedasticity, with high-profitability firms tending toward relatively lower P/E, consistent with a denominator effect. For company management, the findings confirm that consistent dividend payment functions not merely as a financial decision but as a communication instrument that measurably shapes investor perceptions of firm value.

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