Economics and Digital Business Review
Vol. 7 No. 2 (2026)

Firm Size as a Moderator of the Effects of Financial Leverage and the Investment Opportunity Set on Financial Performance

Purwanti Purwanti (Faculty of Economics and Business, Institut Putra Perdana Indonesia)
Endah Salsabila Anggraeni (Faculty of Economics and Business, Institut Putra Perdana Indonesia)
Petty Aprilia Sari (Faculty of Economics and Business, Institut Putra Perdana Indonesia)
Suhariyanto (Faculty of Economics and Business, Institut Putra Perdana Indonesia)



Article Info

Publish Date
28 Aug 2026

Abstract

This study examines the effects of financial leverage, proxied by the debt-to-equity ratio (DER), and the investment opportunity set (IOS), proxied by the market-to-book value of equity (MBVE), on financial performance measured by economic value added (EVA). It also evaluates the moderating role of firm size. The sample comprises 51 property and real estate companies listed on the Indonesia Stock Exchange during 2020-2024 and selected through purposive sampling. Panel data were analyzed in EViews 12 using a fixed-effects model and moderated regression analysis. DER has a significant negative effect on EVA, whereas IOS has no significant effect. Firm size significantly moderates the DER-EVA relationship: the negative interaction coefficient indicates that size intensifies the adverse association between leverage and EVA. Conversely, firm size does not moderate the IOS-EVA relationship. These findings suggest that the funding advantages of large firms may be offset by higher debt-related costs, agency costs, and organizational complexity. Large property firms should therefore exercise tighter control over leverage and ensure that debt-funded investments generate returns above the cost of capital. The study integrates leverage, growth opportunities, firm size, and EVA within a panel-data framework for an emerging-market property sector.

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Journal Info

Abbrev

ecotal

Publisher

Subject

Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

Description

Economics and Digital Business Review, is published by STIE Amkop Makassar in 2020, with registered number ISSN : 2774-2563 (Online), is a peer-reviewed journal published Economics and Digital Business Review published two times a year (January & July) by STIE Amkop Makassar, It provides an academic ...