Effect of Operating Leverage and Financial Leverage on Firm Value through Financial Performance

Sun Dewi Putri (), Cepi Pahlevi and Fauzi R. Rahim
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Sun Dewi Putri: Hasanuddin University
Cepi Pahlevi: Hasanuddin University
Fauzi R. Rahim: Hasanuddin University

A chapter in Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), 2025, pp 1130-1148 from Springer

Abstract: Abstract This study aims to analyze the effect of Operating Leverage and Financial Leverage on Firm Value through financial performance as an intervening variable in the food and beverage sub-sector on the Indonesia Stock Exchange (IDX) for the 2019–2023 period. This study uses a quantitative approach with data collection methods through documentation of financial statements and company annual reports. From a population of 95 companies, a sample was drawn using purposive sampling technique based on certain criteria, so that 34 companies were selected with a total of 170 financial reports used in this study. The collected data were processed using the Smart PLS program with the Structural Equation Modeling (SEM) approach of the Partial Least Square (PLS) type. The results showed that directly Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL) have no significant effect on Financial Performance (ROA and ROE), and both also have no significant effect on Firm Value. In addition, financial performance is proven to have a positive and significant effect on Firm Value. Indirectly, Financial Performance is not able to mediate the relationship between Degree of Operating Leverage and Degree of Financial Leverage on Firm Value.

Keywords: Degree of Operating Leverage; Degree of Financial Leverage; Return on Asset; Return on Equity; Price to Earning Ratio (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-758-8_92

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