Factors Affecting Company Value with Financial Distress as an Intervening Variable

Abstract

The food and beverage subsector on the Indonesia Stock Exchange faces rising raw material costs, weakening purchasing power, and exchange rate fluctuations that may trigger financial distress and reduce company value. Previous studies show inconsistent results on the relationship between company value and financial distress. Based on signalling theory, this study analyzes the effect of profitability, firm size, and sales growth on company value, with financial distress as an intervening variable. Using secondary panel data for 2020–2024 and purposive sampling, the study obtained 209 observations after removing extreme outliers. Company value was measured by Tobin's Q and financial distress by the Altman Z-Score, analyzed through panel data regression and path analysis using EViews 13. Profitability positively and significantly affects financial distress, while firm size and sales growth do not. None of the three variables directly affects company value, but financial distress does, positively and significantly. Financial distress mediates the effect of profitability on company value, but not of firm size or sales growth. Management should maintain profitability to avoid financial distress and sustain company value.