Liquidity and leverage impact on Islamic bank value: A test on multigroup moderated mediation effect

Ahmad, Yusuf Falaqi, Ekowati, Vivin Maharani ORCID: https://orcid.org/0000-0001-6013-0630 and Meldona, Meldona ORCID: https://orcid.org/0000-0002-1787-4818 (2025) Liquidity and leverage impact on Islamic bank value: A test on multigroup moderated mediation effect. Journal of Islamic Economics and Finance Studies, 6 (1). pp. 53-73. ISSN 2723-6749

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Abstract

Firm value is a critical indicator for evaluating a company's performance and future prospects in the market. Factors such as liquidity, leverage, and dividend policy can influence firm value, particularly in the Islamic banking sector, which is characterized by distinct financial management principles. This study aims to examine the impact of liquidity and leverage on firm value, with profitability serving as a mediating variable and dividend policy as a moderating variable. The analysis focuses on Islamic Commercial Banks in Indonesia, Pakistan, and Bangladesh over the period 2019–2023. A quantitative research approach is employed, utilizing Moderated Regression Analysis (MRA) and Path Analysis. The sample comprises financial statement data from Islamic Commercial Banks in the three countries. The independent variables are liquidity, measured by the Current Ratio (CR), and leverage, measured by the Debt to Equity Ratio (DER). The dependent variable is firm value, proxied by the Price to Book Value (PBV). Profitability, measured by Return on Assets (ROA), functions as the mediating variable, while the Dividend Payout Ratio (DPR) represents the moderating variable. he findings reveal that both liquidity and profitability have a significant positive effect on firm value, while leverage exerts a significant negative effect. Profitability mediates the relationship between leverage and firm value but does not mediate the relationship between liquidity and firm value. Additionally, dividend policy does not moderate the effect of either liquidity or leverage on firm value. These results suggest that Islamic bank management should prioritize enhancing liquidity and profitability to improve firm value, while also exercising caution in managing leverage due to its adverse impact. Furthermore, as dividend policy does not function effectively as a moderating mechanism, strategies aimed at increasing firm value should focus more on strengthening fundamental financial performance.

Item Type:	Journal Article
Keywords:	Dividend Policy; Firm Value; Leverage; Liquidity; Profitability
Subjects:	15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150201 Finance 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150203 Financial Institutions (incl. Banking) 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150299 Banking, Finance and Investment not elsewhere classified 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150310 Organisation and Management Theory 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150313 Quality Management
Divisions:	Graduate Schools > Magister Programme > Graduate School of Islamic Economics
Depositing User:	Vivin Maharani Ekowati
Date Deposited:	02 Jul 2025 13:39

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