Dividend Policy as a Mediator between Profitability, Firm Size, and Firm Value in Indonesian Manufacturing Companies

ABSTRACT : The role of a company’s value in the perception of society is undeniably crucial for the survival of a business. Consequently, many companies strive to enhance their image through various means, such as increasing dividends to shareholders. This study aims to investigate the impact of profitability and firm size on firm value and dividend policy in manufacturing companies listed on the Indonesia Stock Exchange during the 2019-2021 period. The sampling technique employed was purposive sampling, resulting in a sample of 35 companies observed over three years, yielding a total of 105 observations. The findings of this study indicate that profitability and firm size have a positive effect on dividend policy; profitability and dividend policy positively affect firm value, while firm size does not influence firm value. Additionally, dividend policy mediates the relationship between profitability and firm size on firm value. The implications of these findings for business practice suggest that companies, particularly manufacturers, should consistently monitor profitability, total assets (firm size), and dividend policy, as these factors have been shown to influence firm value.

KEYWORDS:Company Value, Dividend Policy, Firm Size, Firm Value, Profitability