Financial Performance and Firm Value: The Moderating Role of the Exchange Rate

Purpose: This research aims to examine the effect of financial performance on firm and also analyses the role of exchange rates as a moderating variable. Design/methodology/approach: This research applies multiple regression, using a random-effect model. Findings: The analysis results show that profitability negatively and significantly affects firm value. The z-statistic value is approximately -1.95, with a significance level of 5%. Meanwhile, the exchange rate weakens the relationship between liquidity and firm value, z-statistic 2.14 and a significance level 5%. In addition, exchange rate also weak-ens the relationship between capital structure on firm value, z-statistics is 11.66 and as significance level at 10%. Research limitations/implications: This research can be a consideration for the Indonesian financial authorities regarding the determination of policies related to exchange rates. Moreover, this research can be a guidance for IDX30 companies in generating high financial performance and generating higher firm value. Furthermore, this research can also guide investors when evaluating firms’ financial performance and firm value before making invest-ment decisions. Originality/value: Applying the exchange rate as a moderator in the influence of firm performance on firm value become the novely of this research.