Corporate Governance, Firm Size, and Leverage on Firm Value: Panel Evidence from Construction and Infrastructure Companies Listed on the Indonesia Stock Exchange

Abstract

The construction and infrastructure sector is a strategic driver of the Indonesian economy, yet listed firms in this sector have faced persistent pressure on market valuation in recent years. This study examines the effect of corporate governance — proxied by board size, the proportion of independent commissioners, institutional ownership, and managerial ownership — together with firm size and leverage, on firm value measured by price to book value. Using purposive sampling of construction and infrastructure companies listed on the Indonesia Stock Exchange over 2022–2025, 24 firms were obtained, yielding a balanced panel of 96 firm-year observations. Panel data regression was conducted using Stata. The Hausman test indicates that the random effects model is appropriate, while the Modified Wald and Wooldridge tests confirm the presence of groupwise heteroscedasticity and first-order serial correlation; estimation therefore employs random effects regression with cluster-robust standard errors. The results show that leverage has a positive and significant effect on firm value at the 1% level, while institutional ownership is positively and firm size negatively associated with firm value at the 10% level. Board size, the proportion of independent commissioners, and managerial ownership have no significant effect. These findings indicate that market valuation in this sector is shaped more by capital structure than by the formal architecture of governance bodies. The study contributes by demonstrating that panel estimation which accounts for firm-level heterogeneity yields materially different conclusions from pooled cross-sectional analysis, since 63.5% of the variance in firm value is attributable to unobserved firm effects.