Does Bank Soundness Matter for Firm Value? A Comprehensive Study Using Indonesia's RGEC Evaluation Model

ABSTRACT : This study aims to examine the effect of bank soundness, measured using the Risk Profile, Good Corporate Governance, Earnings, and Capital (RGEC) framework, on the firm value of conventional banks. Firm value is proxied by Tobin’s Q, while bank soundness is measured by non-performing loans (NPL) as a proxy for risk profile, self-assessment scores as a proxy for good corporate governance, return on assets (ROA) as a proxy for earnings, and the capital adequacy ratio (CAR) as a proxy for capital. This research employs descriptive and verificative methods with a quantitative approach. Data analysis is conducted using panel data regression. The sample is selected through purposive sampling, resulting in 42 conventional banks listed on the Indonesia Stock Exchange during the 2020–2023 period. Hypothesis testing is performed using the F-test and t-test. The results indicate that the risk profile proxied by NPL has a significant negative effect on firm value. Good corporate governance proxied by self-assessment shows no significant effect on firm value. Earnings proxied by ROA have a significant negative effect on firm value, while capital proxied by CAR has a significant positive effect on firm value. The adjusted R-squared value of 0.164 suggests that 16.4% of the variation in firm value can be explained by risk profile, good corporate governance, earnings, and capital, while the remaining 83.6% is influenced by other factors outside the research model.