The Mediating Role of Profitability in the Relationship between Firm Growth, Firm Size and Firm Value: Evidence from Indonesia’s Real Estate Subsector

Abstract

The real estate sub-sector plays a vital role in supporting Indonesia’s economic development, yet fluctuations in firm value remain a challenge despite continuous asset growth and business expansion. This study aims to examine the effect of firm growth and firm size on firm value, with profitability serving as a mediating variable. The research focuses on companies within the real estate sub-sector listed on the Indonesia Stock Exchange during the 2021–2024 period. A quantitative approach was employed using path analysis, with 37 companies selected through criterion-based selection. The empirical findings demonstrate that firm growth and firm size exert a significant positive influence on firm value, and profitability significantly mediates these relationships. These results underscore the strategic role of profitability in translating firm characteristics into improved market valuation. Based on these findings, real estate companies are advised to align expansion strategies with profitability enhancement to strengthen market perception and long-term firm value.