and Dividend Policy on Firm Banking Value Analysis of the Effect of Profitability, Solvability, and Dividend Policy on Firm Banking Value Tonny I. Soewignyo

As a financial intermediary, Bank is an institution that collects and distribute funds from the public or investors. Investors will put their investment in a bank with good reputation to obtain maximum return, and they generally pay attention to profitability, solvability, and dividen policy of the company. Research conducted by Bangun and Wati (2007) found that profitability significantly affect the value of the firm, while the dividend policy does not affect firm value significantly.

In contrast, Sambora, Handayani, and Rahayu (2014) found no significant effect of profitability on firm value. In addition, Sari (2013) found a positive and significant effect of dividend policy on firm value. In terms of solvability, Rompas (2013) found that solvability significantly affect value of enterprises.

Profitability Solvability Dividend policy Firm value Objective: Examine the effect of profitability, solvability, and dividend policy simultaneously on firm banking value as listed on Indonesian Stock Exchange for the 2012-2014 period by using multiple linear regression. Profitability Solvability Dividend policy Firm value

Firm Value Is the amount that prospective investors are willing to pay if the firm is sold. For publicly traded companies, the firm value indicator is the stock price traded on the stock exchange High firm value means a companies have prospects in the future Firm value can be measured by Price to book value (PBV) ratio

Profitability An income generate through the sale and investment made by the company. Researcher used Return on Equity (ROE) and Return on Asset (ROA) as proxy for profitability. ROE shows the company’s ability to generate net income return on shareholders’ equity. ROA shows the ability of a firm to generate net income from assets used in operations.

Solvability Is ability of the company to generate profits during a certain period to pay its debts, both short-term and long-term debt. The company’s ability to meet its obligations used Debt to Asset Ratio (DAR), Debt to Equity Ratio (DER). DAR measures how much of the company assets is financed by debt. DER is used to determine the amount of owners’ equity used to guarantee its debts.

Dividend Is a payment made by a corporation to its shareholders usually as a distribution of a portion of a company’s earnings, decided by the board of directors. Increasing dividend payments is a positive signal in regard to company’s prospects. Dividend policy affect the assessment of investors on the merits of a company because dividend policy will maximize company’s stock price and positive significantly affect firm value.

Hipotesis H1 : Profitability, solvability, and dividend policy simultaneously affect value of banking firms.

Sample Purposive sampling method used. No Code Name 1 BBNI Bank Negara Indonesia (Persero) Tbk 2 BBTN Bank Tabungan Negara (Persero) Tbk 3 BDMN Bank Danamon Indonesia Tbk 4 BMRI Bank Mandiri (Persero) Tbk 5 BNBA Bank Bumi Arta Tbk Purposive sampling method used. Bank firms which have consistently published financial statements and has paid dividends for the 2012-2014. Five bank firms as follows:

Fulfilled Classical Assumption Test Normal distribution (K/S val - 0.880>0.05) No Multicolinearity (Tol val >0.10 & VIF val <10) No Autocorrelation (DW) (1.96<2.038<2.04) No heteroscedasticity (using scatterplot test) Fulfilled Classical Assumption Test

Results Table 1 F-test with sig 0.001<0.05, therefore Ha is accepted; Profitablility (ROE, ROA), Solvability (DER, DAR), and Dividend Policy (DPR) significantlly affect firm value (PBV) Adjusted R² value = 0.804 signifies that 80.4% of DV can be predicted by IV, the remaining 19.6% is influenced by other variables.

Results Further analysis of Independent variables: ROE has significant positive affect on firm value (sig. 0.00<0.05), and unstandardized beta value of 6.899 which means that a one unit increase of ROE can increase the value of firm for 6.899. DAR is found to have a significant negative effect on firm value with significant value of 0.033<0.05 and unstandardized beta -4.402. it implies that on each unit increase in DAR, there will be 4.402 decrease in firm value.

Conclusion Investors, when investing in the form of purchasing banking shares observe the value of the firm. Simultaneously, profitability, solvability, and dividend significantly affect the value of the firm Profitability as measured by ROE has significant positive effect on firm value. High level of profitability indicates good bank firms prospect, and investors are interested (ROE 8-44%). But solvability as measured by DAR has significant negative effect on firm value. Therefore, the Indonesian banking show agreater risk because banks rely on debt financing in the capital structure. (DAR 82-92%).

Recommendation Further research is expected to increase number of samples as the number of samples used in this study is relative small. This study did not measure other factors that may affect value of banking firms such as corporate governance, liquidity, capitalization, and asset quality. By adding these factors, future research may contribute a larger contribution and input to the banking industry

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