Profitability as a Mediator between Interest Rates, Legal Reserve Requirement, and Firm Value: Evidence from the Banking Sector

Abstract

The purpose of this research is to gain knowledge about whether interest rates and legal reserve requirements have an influence on firm value with profitability as an intervening variable. The research was conducted on banking sub-sector companies listed on the Indonesia Stock Exchange (BEI) from 2019 to 2023. This study uses a quantitative approach with analysis techniques assisted by SPSS version 25. The sample was determined through purposive sampling and resulted in 215 observational data. The results of this study show that interest rates do not have an influence on profitability or firm value. Legal reserve requirements have a significant and positive influence on profitability and firm value. Meanwhile, profitability has a significant and negative influence on firm value and mediates the influence of the three independent variables on firm value.