The Effect of Financial Performance on Firm Value: The Moderating Role of Corporate Governance

Aims: This study aims to empirically examine the effect of financial performance, proxied by liquidity, leverage, activity, and profitability ratios, on firm value with corporate governance as a moderating variable. Study Design: This study uses quantitative methods with secondary data taken from the financial reports of energy sector companies with data collection techniques using purposive sampling. Place and Duration of Study: The population in this study are energy sector companies which are listed on the Indonesia Stock Exchange during 2019-2023. Methodology: The data analysis technique is Moderated Regression Analysis (MRA) with the aid of IBM SPSS Statistics 26. Results: The result of the analysis in this study found that financial performance with proxied by liquidity (β = -.063, p < .05) and profitability (β = -.621, p < .05) ratios has a negative effect on firm value, but leverage (β = .124, p > .05) and activity (β = .300, p < .05) ratios has a positive effect on firm value, and corporate governance can moderate a firm value's liquidity, leverage, activity, and profitability ratios. Conclusion: This study concludes that financial performance can have a positive effect on firm value if companies use optimal debt and effective asset management. However, high levels of liquidity and profitability do not always increase company value, which may be due to inefficient use of resources or suboptimal reinvestment strategies. The presence of corporate governance has been shown to moderate the relationship between financial performance and company value, either strengthening or weakening that influence depending on the quality and effectiveness of the governance mechanisms implemented. These findings underscore the importance of governance structures in aligning managerial actions with shareholder interests and enhancing company value.