Literature Review on the Relationship between Profitability andLeverage in Company Value
Keywords:
Profitability, Leverage, Firm ValueAbstract
This study aims to discuss trends, strengths, and weaknesses of
previous research, as well as compare recommendations for future
research. Furthermore, this article will examine the effect of
profitability and leverage on firm value through a literature review.
Firm value is an important indicator reflecting a company's
performance and investor perceptions of its prospects. Internal
factors such as profitability and leverage are often considered
crucial in determining firm value. Using a systematic literature review
(SLR) approach, this study analyzes and synthesizes findings from
previous studies published between 2020 and 2025, focusing on
companies in Indonesia. The results show that profitability
consistently has a positive effect on firm value. Companies with high
profitability tend to perform well and attract investor interest, thus
increasing stock prices and firm value. Meanwhile, leverage shows
mixed results. Some studies find that leverage negatively affects firm
value because high debt levels can increase financial risk. However,
other studies show that leverage does not always have a negative
impact, depending on the company's ability to manage debt
efficiently. These findings provide insights for management and
investors into how profitability and leverage can affect firm value. In
addition, further research is needed to explore the relationship
between these two variables in various industrial sectors and
different economic conditions.
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Copyright (c) 2026 Enjelica Novia, Gabriela Olivia, Putri Amel, Deliana Deliana, Anggiat Situngkir (Author)
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