The Effect of Leverage, Agency Cost, and Firm Size on Firm Value

Abstract

Maximizing the value of the firm is the main responsibility that must be performed by the company management since the firm value is a reflection of a company's market price, which will maximize shareholder wealth. The objective of this study is to analyze the effect of leverage, agency cost, and firm size on firm value in the property and real estate companies listed in the Indonesia Capital Market; and understand which variables that have a strong influence on the firm value. This study used secondary data collected from the official website of the Indonesia Stock Exchange for the period of 2013–2019. The sample used in this research is 38 companies that were selected by using purposive sampling technique. A panel data regression was used to determine the effect of leverage, agency cost, and firm size on firm value. The study result shows that only agency cost has a strong effect on the firm value. Meanwhile, leverage and firm size has no effect on the firm value. These findings contribute to the firm management as information and consideration in the way to maximize firm value.