The Impact of Macro Economy on Firm Values and Financial Performance as an Intervening Variable : An Empirical Study of LQ-45 Banking Industries in Indonesia

Objective – The Purpose of the paper is to empirically investigate both direct and indirect impact of macro economy, which are Exchange Rates, Inflation, Central Bank Rate, as independent variables, on Value Firms (Price to Book Value), as a dependent variable, and its Financial Performance (Return on Assets), as an interning variable.Methodology/Technique - The study uses a path analytical method of the SPSS for determining a strong causal relationship between independent variable and the dependent variable either directly or indirectly.Findings - The paper finds that Exchange Rate does not impact on ROA; Inflation negative significantly impacts on ROA; Central Bank Rates positive significantly impact on ROA; ROA does not impact on PBV; Exchange Rate negative significantly impact on PBV; Inflation does not impact on PBV; Central Bank Rate does not impact on PBV; ROA does not mediate its impact of Exchange Rates on Firm Value (PBV); ROA does not mediate its impact of Inflation on Firm Value (PBV) and ROA mediate its impact of Central Bank Rates on Firm Value (PBV).Novelty - The paper uses corporate performance (Return on Assets) as an intervening variable to test the indirect effect on firm values (PBV).Type of Paper: Research paper