The Effect of Financial Performance on The FirmValue of Banking Companies Listed On The Stock Exchange of Thailand

Abstract

This study aims to analyze and examine the effect of financial performance proxied by profitability (Return on Assets and Return on Equity), liquidity (Loan to Deposit Ratio), and solvency (Capital Adequacy Ratio) on firm value as measured by Tobin's Q in the banking sector listed on the Stock Exchange of Thailand (SET) during the period 2020 to 2024. Using a quantitative approach and saturated sampling method to determine the sample, secondary data obtained from annual financial reports were analyzed using panel data regression with a Random Effect Model (REM) estimation model through Eviews software. The results show that Return on Equity (ROE) has a positive and significant effect on firm value, signaling that a bank's ability to generate profits for shareholders is a key consideration for investors in assigning high valuations to companies. Conversely, Return on Assets (ROA) was unexpectedly found to have a negative and significant effect on firm value in the context of the Thai banking market during the study period. Meanwhile, the liquidity (Loan to Deposit Ratio) and solvency (Capital Adequacy Ratio) variables were not proven to have a significant effect on firm value, indicating that fluctuations in these ratios are not the main basis for investors in assessing the market value of banks. This finding confirms the importance of efficient equity management as a positive signal in boosting market confidence in the banking sector on the Stock Exchange of Thailand.