Debt, Firm Size, and Firm Value: Evidence from Consumer Cyclical Companies Listed on the Indonesia Stock Exchange

Abstract

This study aims to analyze the effects of the Debt-to-Equity Ratio (DER) and firm size on firm value in consumer cyclical companies listed on the Indonesia Stock Exchange (IDX). The study draws on a synthesis of relevant prior research on capital structure, firm size, and firm value. The literature indicates inconsistent empirical findings. Capital structure has been found to increase firm value in some studies, whereas in other contexts leverage is perceived as a financial risk that reduces firm value. Similarly, firm size may have different effects depending on sector characteristics, asset management, and operational efficiency. These inconsistencies provide a basis for further empirical testing in the consumer cyclical sector. Methodologically, the study is designed as explanatory quantitative research using panel data from consumer cyclical companies. Firm value is proxied by Price-to-Book Value (PBV), DER by total debt divided by total equity, and firm size by the natural logarithm of total assets. The study is expected to provide empirical evidence on the relationship between financing structure, company scale, and firm value in the consumer cyclical sector.