Why Consumer Non-Cyclicals Companies Matter
Consumer non-cyclicals companies supply essential goods and services, making the sector an important part of Indonesia’s economy. Demand for these products tends to be relatively stable because they are associated with basic household and daily needs.
Despite its economic importance, the sector experienced a declining trend in average firm value between 2020 and 2024. The average value fell from 1.74 in 2020 to 1.43 in 2024, according to the study. This decline points to a gap between the sector’s contribution to the economy and how investors perceived the market value of its companies.
The researchers focused on three financial indicators that can influence how investors view a company. Liquidity measures a company’s ability to meet short-term obligations, solvency reflects its ability to manage long-term debt, and profitability indicates how effectively the company generates earnings from its assets.
How the Study Was Conducted
Khofifah Nur’Aini and Iwan Firdaus used a quantitative approach and a causal research design. The analysis covered consumer non-cyclicals companies listed on the Indonesia Stock Exchange during the 2020–2024 period. Companies were selected using specific criteria through purposive sampling.
The researchers used financial statement data obtained from the official IDX website. Four indicators represented the main variables: the Current Ratio (CR) for liquidity, Debt-to-Equity Ratio (DER) for solvency, Return on Assets (ROA) for profitability, and Tobin’s Q for firm value.
The data were analyzed using panel-data regression with EViews software. Statistical tests were used to determine the most appropriate regression model, while a Sobel test examined whether profitability acted as an intermediary between liquidity or solvency and firm value.
Profitability Shows the Strongest Relationship with Firm Value
The results provide a clear distinction between the roles of liquidity, solvency, and profitability.
- Liquidity did not significantly affect firm value. The coefficient was -0.060349 with a probability value of 0.2407, meaning the relationship was statistically insignificant.
- Solvency did not significantly affect firm value. Its coefficient was 0.113390, with a probability value of 0.3204.
- Profitability had a positive and significant effect on firm value. ROA recorded a coefficient of 12.88249 and a probability value of 0.0146.
- Liquidity positively affected profitability. The liquidity coefficient was 0.005477 with a probability value of 0.0000.
- Solvency did not significantly affect profitability. Its coefficient was -0.0000196 with a probability value of 0.9942.
These findings suggest that having sufficient short-term financial resources may help companies maintain operations and generate profits, but liquidity alone does not automatically translate into higher market value.
The study also found that profitability connects liquidity with firm value. The Sobel test produced a t-statistic of 2.29452088 and a p-value of 0.0217606, confirming a significant indirect relationship. By contrast, profitability did not mediate the relationship between solvency and firm value, with a p-value of 0.99414733.
What the Findings Mean for Companies and Investors
For consumer non-cyclicals companies, the findings suggest that maintaining liquidity is important, but accumulating excessive liquid assets may not increase firm value. Cash and other current assets need to be managed efficiently so they support productive business activities rather than remain underutilized.
Profit generation, meanwhile, appears to be more closely connected with how investors value companies. The researchers found that companies with stronger ROA tended to have higher firm values, indicating that investors may pay greater attention to a company’s ability to use its assets efficiently and generate earnings.
The results also suggest that debt levels alone may not determine whether a consumer non-cyclicals company is considered valuable by the market. Solvency showed no significant relationship with either profitability or firm value. Operational efficiency, sales performance, and cost management may therefore deserve greater managerial attention when companies seek to strengthen profitability.
For investors, the study highlights profitability as a potentially important indicator when evaluating consumer non-cyclicals companies. A company’s ability to generate returns from its assets can provide a stronger signal about financial performance and future prospects than liquidity or debt levels alone.
Researchers’ Perspective
Khofifah Nur’Aini and Iwan Firdaus of Universitas Mercu Buana emphasize that profitability plays an important role in the relationship between financial performance and firm value. Their findings indicate that effective liquidity management can support profitability, while stronger profitability can subsequently contribute to higher firm value.
In practical terms, the study points to a simple financial management message: companies need enough liquidity to keep operations running, but they also need to turn their assets into sustainable earnings.
Author Profile
Khofifah Nur’Aini is a researcher affiliated with Universitas Mercu Buana and the corresponding author of the article. Her work in this study focuses on corporate finance, financial ratios, profitability, and firm value.
Iwan Firdaus is affiliated with Universitas Mercu Buana and co-authored the study with Khofifah Nur’Aini. Their research examines financial factors affecting the performance and market value of companies.
Source
Article Title: The Effect of Liquidity and Solvency on the Firm Value of Consumer Non-Cyclicals Companies Listed on the Indonesia Stock Exchange: The Mediating Role of Profitability
Journal: International Journal of Sustainable Applied Sciences (IJSAS)
Publication Year: 2026
Volume: 4, No. 6
Pages: 797–810
Authors: Khofifah Nur’Aini and Iwan Firdaus, Universitas Mercu Buana
DOI: https://doi.org/10.59890/ijsas.v4i7.14
URL: http://ijsasjournal.my.id/index.php/ijsas
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