The Effect of Profitability, Company Value, and Leverage on Company Size (Case Study of a Retail Company Listed on The Indonesia Stock Exchange for The Period 2018 – 2022)

ABSTRACT


INTRODUCTION
In the era of rapid economic globalization, companies are faced with various challenges that require effective management strategies to ensure operational continuity and the achievement of long-term goals.In spite of its size, the firm is one of the vital measures that show its success and overall health.The total assets owned provide insight into the company's success.Consequently, stakeholders-including investors, financial analysts, and shareholders-are concentrating more on comprehending the variables that may impact the company's size and are consequently reining in internal and external analysis, development plans, and the allocation of the company's current human resources.
In the financial literature, the relationship between profitability, firm value, leverage and firm size comes into focus.Understanding these factors is important for a company's financial strategy.Profitability is one of the key aspects that reflects the effectiveness of management in generating profits.
According to Sari and [1], company profitability refers to the ability of an entity to generate profits from its operations.A high level of profitability indicates that assets are used efficiently, generating revenue in excess of costs.This reflects the efficiency and effectiveness of asset management and operations to achieve positive financial results.The value of a company reflects the market's assessment of its performance, growth, and competitive position.These key metrics reflect a company's health and performance and can be measured by various metrics such as market capitalization or book value.The higher the value, the better the company's image.
Leverage is the use of funding methods or sources to increase the potential return on investments, including loans and other financial instruments.This can magnify profits for shareholders in favorable situations, but also increase the company's financial risk.
The size of a company can be measured by factors such as the size of assets, sales volume, and total assets.Larger companies may be more operationally efficient and have power in business negotiations.Company growth has a major impact on individuals, human resources, and the organization as a whole, affecting the vision, mission, and achievement of goals [2].
The company strives to achieve its long and short-term goals to improve sustainability.Company engagement can attract investors, increase value, and stock price relevance as key investment indicators [3].Other studies show that profitability partially affects a company's value positively, while company size and leverage have no partially significant effect.However, simultaneously, these variables have quite an influence on the company [4].
Additional research has demonstrated that while profitability does not mitigate the impact of firm size, it does favorably influence business value to some extent.Leverage and company size also have a large, partial impact [5].
Studies on liquidity management, profitability, and dividend policy of company X show a lack of systematization in maintaining these factors.Short period research requires further review with longer data and more in-depth analysis [6].
This article provides a foundation for advanced research in understanding the factors that influence the size of firms and their implications for managerial decisionmaking and economic policy.
By detailing these aspects, this study aims to investigate the effect of profitability, company value and leverage on the size of companies that focus on one of the existing companies in Indonesia.In-depth analysis of these variables is expected to provide better insight into the factors affecting company size, providing a foundation for companies to make better strategic decisions in managing their capital structure, company value, and financial performance.With a better understanding of these relationships, companies can increase their value and optimize their financial performance in an increasingly dynamic business environment.
Companies must develop effective and adaptive management strategies to maintain operational continuity in a rapidly changing business environment.Competition in retail is fierce, with the company's primary focus on achieving shareholder prosperity through increasing company size.An increase in the size of the company contributes positively to the well-being of shareholders, reflected in the value of the shares.Falling stock prices reduce company value and shareholder welfare, while rising share prices increase company size and profits for shareholders.

LITERATURE REVIEW 1 Profitability
Profitability is a comparison that aims to assess the extent to which a company is able to generate profits in a certain period of time.In addition, it also provides an overview of how effective management is in carrying out its operations [7].

2 Company Value
Investors' perception of a firm based on its stock price, which dictates its performance, is known as its company value.Consequently, the worth of the firm is reflected in investors' assessment of its performance, which is frequently correlated with its stock price [8].

3 Leverage
Leverage is a comparison between debt and capital within a company, reflecting the extent to which the company gets financing from debt or outside parties.If the company's internal funding sources are insufficient, the company needs to seek external funding.The leverage ratio measures the ratio between funds originating from company owners and funds borrowed from creditors.

4 Company Size
The volume of a business as perceived or quantified by its current assets is known as its company size.As a result, a scale that enables categorization based on many variables, such as total assets, log size, stock market value, and so on, may be used to characterize a company's size.In addition, company dimensions can also be described through parameters such as total assets, sales volume, average asset sales, and average total company assets [9].

METHODS
In other words, this research employs secondary data.It is quantitative in nature and is based on financial statements with case studies of retail firms listed on the Indonesia Stock Exchange for the 2018-2022 timeframe.Based on the four characteristics in this study-profitability, company value, leverage, and company size-the report will be evaluated.Each of these variables will be searched for relationships between independent variables using company size variables.In addition to data from the company's financial statements, researchers will also use relevant literature data and analyze as additional data and strengthen the research conducted.

Research Overview
Historically, the capital market has been present long before Indonesia became independent.The capital market or stock exchange has been present since the Dutch colonial era and precisely in 1912 in Batavia.The capital market at that time was educated by the Dutch Hidia government for the benefit of the colonial government or VOC.Although the capital market has existed since 1912, the development and growth of the capital market did not run as expected, even in some periods of capital market activity experiencing a vacuum.This was caused by several factors such as World War I and II, the transfer of power from the colonial government to the government of the Republic of Indonesia, and various conditions that caused stock exchange operations to not run properly.
The Government of the Republic of Indonesia reactivated the capital market in 1977, and a few years later the capital market experienced growth in line with various incentives and regulations issued by the government.The Indonesia Stock Exchange has a vision of "becoming a competitive exchange with world-class credibility" and a mission of "creating a trusted and credible financial market infrastructure to realize an orderly, fair, and efficient market, accessible to all stakeholders through innovative products and services".
Market growth then arguably vacuum and not grow.This is because of World Wars I and II.The war not only affected the loss of life, but also the economy and industry of many major countries involved in the war.The independence of the Republic of Indonesia (RI) has not been able to restore the Indonesian capital market.Around 1925-1942, the capital market was not only the Jakarta Stock Exchange (JSX), but also stood in Semarang and Surabaya even though it had not operated as such.After the nationalization of Dutch companies and assets in 1956, the stock exchange in Indonesia was briefly vacuumed.Only in 1977, the Government of Indonesia reactivated the capital market in Jakarta.President Suharto established the Capital Market Implementing Agency (BAPEPAM).In 1995 the government also issued Law No. 8 on Capital Market.

Growth
continued with the establishment of the Indonesian Securities Guarantee Clearing (KPEI) in 1995 and August 6, 1996, the Indonesian Central Securities Depository (KSEI).In order to create the Indonesia Stock Exchange (IDX), the Jakarta-based Indonesia Parallel Exchange and the Surabaya Stock Exchange (SSX) combined in 2007.To ensure that the Indonesian stock exchange keeps expanding, the government is taking proactive measures.The authorities founded the Financial Services Authority (OJK) in 2012.Followed by the establishment of trading system renewal and New Data Center, IDX Incubator, PT Dana Efek Indonesia, and IDX Channel.In 2019, there were more than 600 corporations listed on the IDX with a total of 1.1 million investors.This number is up 30 percent from the previous year.Now, people can access investment on the IDX more easily and safely.

Classical Assumption Test a. Normality Test
The normality test is performed using the Kolmogorov-Smirnov Test, a nonparametric statistical test, determining whether two samples are from the same distribution.The test results carried out with spss are as follows: 3. Use leverage X3, which indicates that there is no multicollinearity, with a tolerance value of 0.313 > 0.10 and a VIF value of < 10.00.

c. Heteroscedasticity Test
The heteroscedasticity test is used to determine if there are deviations from classical assumptions.Heteroscedasticity means that the residual variance is not the same for every observation in the regression model.One of the conditions of the regression model is the absence of symptoms of heteroscedasticity.

Tablel 3.3 Heteroscedasticity Test Results
The results of testing on the scatter plot show that the points on the plot are scattered randomly and are well distributed, above or below the y-axis is at number 0, so it can be concluded that there is no heteroscedasticity in the regression model and can be concluded that there is no heteroscedasticity in regression models that predict based on variables of profitability, company value, and leverage against company size.Based on the results of the SPSS test carried out, an R2 value of 0.730 was obtained.This shows that 85% of the company's size is explained by leverage, company value and profitability, while the remaining 15% is explained by other variables.

2) Test f
The F-test is a statistical test used to compare the ability of two or more regression models to explain variations in data.The F test is often used in the context of linear regression analysis, especially when wanting to evaluate whether adding one or more independent variables to a model significantly improves the model's ability to explain the dependent variable.The spss test results show the following: Based on the results of the SPSS output linearity test, we can know that the hypothesis criteria of the t test (partial) on the profitability variable, namely H_o1 rejected if the sign > 0.05 t_hitung ≤ t_tabel and H_a1 accepted when the sign > 0.05 t_hitung ≥ t_tabel, the SPSS test results show that t_hitung 7.251 and t_tabel 1.71387 there is a linear relationship between the profitability of There is a substantial linearity of 0.000 < 0.05 between X1 and the size of firm Y. Thus, it can be said that a company's size is significantly positively impacted by its profitability.

DISCUSSION 1) The effect of profitability on the size of the company
Based on studies that have been conducted, experts have determined that probability fulfills the 5% significance criterion and has a favorable effect.Table 3.4 of the partial test (Test T) displays these findings once more.The test has been deemed successful based on the results of 4.850 > 2.0796.The greater the profitability relative to the company's size, the greater the future impact bestowed to the enterprise.According to partial test findings, probability has a positive and considerable impact on the company's size, which supports the first hypothesis or speculation on the probability variable.
Better business size will undoubtedly be preferred in order to assist the attainment of company goals, which will enable the firm to continue building and sustaining its reputation in the community and getting ready for the market.The findings of this investigation are consistent with studies carried by by [10] that the probability ratio is a ratio used to see the company's ability to seek profits in a certain period.The growth rate of the probability ratio is one type of ratio that is often used in seeing how the company's prospects in the future. 2

) The Effect of Company Value on Company Size
The findings of research investigations indicate that the company's size has a negative impact and falls short of the 5% significant threshold.Therefore, all of the results from the data testing are visible once again in table 3.4 Partial Test Results (Test T) -1.892 < 2.0796; this indicates that the test was successful.The impact will be greater the higher the firm's worth on the company size.
The second hypothesis, or conjecture, about the variable of business size-that is, that company value has a small and negative influence on the size of the firm-is valid, based on incomplete test results.Company value is defined as the opinion of investors in a company as reflected in the stock price, which determines the success of the business.[8].Consequently, a company's worth is reflected in investors' assessment of its success, which is frequently correlated with stock price [11].
The findings of this investigation are consistent with those carried out by [12].The case study of PT.Hero, PT.Catur Sentosa Adiprana, PT.Matahari, PT.Ramayana Lestari Sentosa, and The determinant coefficient for the retail firms listed on the Indonesia stock market for the period of 2018-2022 is 0.692, or 69.2%, according to PT. Mitra Adi Perkasa.This suggests that the factors of profitability, company value, and leverage can impact the size of the company.The remaining 30.8% are influenced by additional elements that have not been researched or looked into.

3) The Effect of Leverage on Company Size
According to the findings of research investigations, leverage has a negative impact and does not satisfy the 5% significant threshold.Thus, it is evident that table 3.3 displays all of the results that were acquired during data testing.The multiple linear regression test yields a value of bx -0.008, which indicates that, if other factors stay constant, the coefficient value indicates an increase in leverage and can lead to a -0.008 rise in the company's value.Furthermore, it can be seen again based on the results of table 3.4 partial test (T test) with results of -1.868 < 2.0796 which indicate that the test has been successful.The better the leverage on Company Size, the better the influence will be on the company in the future.
In partial test results that have been found in accordance with the third hypothesis or conjecture on the variable leverage where (Leverage has a negative and insignificant effect on Company Size).Leverage is a comparison between debt and capital within a company, reflecting the extent to which the company gets financing from debt or outside parties.If the company's internal funding sources are insufficient, the company needs to seek external funding.The leverage ratio measures the ratio between funds originating from company owners and funds borrowed from creditors.