The Impact of Financial Ratios on the Value of Companies That Conducted M&A Which Registered in IDX on 2016-2021

This study aims to analyze the impact of the financial ratios such liquidity, solvability, turnover, profitability, and market value, economic value added and operating cash flow on the market value added of corporate mergers and acquisitions that listed in IDX from 2016 to 2021. The research informs influence of independent variables to MVA in companies that do M&A as their business strategy. The sampling technique in this study used non-probability sampling with purposive sampling method. Obtained samples of 19 public companies listed on the IDX and secondary data taken from the Indonesian Stock Exchange website. Financial performance measurement takes place five years before and after M&A. The analytical method uses panel data regression and from panel regression we found that EVA, CR, and ROE are significantly positive influenced with market value added of listed firms in Indonesia that conducted M&A. Our results indicate that earning per share significantly has negative influence to MVA; while DER and TATO are insignificantly negative influenced and OCF is insignificantly positive influenced with market value added.


INTRODUCTION
Measurement of company performance will be seen from the financial ratios, such profitability, solvency, turnover, liquidity, and market; as well as from added value to the company, such as Economic Value Added (EVA) and Market Value Added (MVA).
Previous research stated that ratios that can provide financial information on a company's ability after M&A are carried out are liquidity, solvency, activity, and profitability (Kusumawati & Kamal, 2022).
The concept of an economic framework is an innovative way to measure company value and can determines the value and performance of a company based on the economic situation instead of traditional accounting.EVA determines the criteria for business performance, the effectiveness of its financial structure, as well as a single reference level for various company activities both in financial and investment activities (Jakub, Viera, & Eva, 2015).The effective management also has an important role in increasing the value of the company because it helps to make stronger decisions, which leads to increased company performance (Kumar, Bhatia, & Chattopadhyay, 2022).
Sales growth, operating profitability, level of capital and cost of capital can be considered as drivers of core values.The operational efficiency, financial efficiency and competency investment can be reflected in MVA (Kumar, Bhatia, & Chattopadhyay, 2022).The greater MVA value will make shareholders and investors happier because the wealth can increase (Sunarko & Martini, 2018).
Several studies have found that EVA is not a determinant of MVA, so many studies have used other variables to test it.This study aims to examine the effect of financial ratios peroxided by EVA, CR, DER, TATO, EPS, ROE, and OCF in relation to MVA, especially non-bank companies that carry out mergers and acquisitions listed on IDX during the period 2016-2021.This research analyzes the influence between financial ratios, cash flow, and EVA to company value.The results of this study are expected to assist company management in knowing the factors that influence MVA, especially in relation to the decision to carry out M&A, to help companies in taking strategies in allocating their investments.Companies that did M&A for their business.

LITERATURE REVIEW
The growth of a company through an external process, namely through M&A, may involve absorption or consolidation also can be friendly or hostile.An act of forced acquisition can become a takeover (Rao & Kumar, 2013).The results of the merger can arise from several sources such as economic activities, activities from finance, taxation effects that may result in smaller tax payments, effectiveness and efficiency and increased market position (Moin, 2013).M&A considered as a profitable investment because it can provide an efficiency advantage in finance, can provide tax control economies of scale in combining several existing resources and eliminating inefficient things (Kusumawati & Kamal, 2022).
There are several conventional assessments to evaluate company performance, such as ROCE, ROS, ROA, and ROE.Meanwhile, the company's performance cannot be measured only with the help of accounting profit because it cannot predict the company's performance consistently (Fu, Lin, & Officer, 2013).Several studies conducted empirical analysis that EVA is the best measure in explaining company performance compared to traditional accounting measurements in relation to the company's market value or stock returns.On the other hand, there are some drawbacks of these restrictions and have influenced with more efficient and significant measurements (Sura, Panchal, & Lather, 2023).EVA is considered as a better criterion than traditional measurements such as ROA, ROE, and ROI to measure value creation and internal performance of companies (Kumar, Bhatia, & Chattopadhyay, 2022).increase in share value, but in fact there is no evidence that financial markets recognize and include EVA in their share prices (Shubita, 2013).If a company has a negative EVA history, then its MVA will probably be negative, and vice versa.This is also to be seen in relation to companies that carry out M&A where it is to be seen that EVA can affect MVA or traditional indicators that have more influence on companies that carry out M&A.
Profitability is one of the important determinants of MVA.If profitability shows positive, it means there is added value to the company's assets and vice versa (Khakwani, SadiqShahid, & Hamza, 2016).Meanwhile, leverage measures business risk as it causes financial risk.Other research about influence to MVA is influence between MVA and OCF (Sunarko & Martini, 2018).it is expected that when the company conducts M&A and there is a positive value on EVA, this provides information that the company's value is increases too, but some find it has no influence (Rahmawati & Yunita, 2018).Lacking influence of EVA with market value will make investors cannot use the same internal value creation measures as traditional performance measures (Alipour & Pejman, 2015).
Other research to the influence of leverage ratio using a DER proxy has also been carried out by previous researchers, where a negative effect was found, the higher the DER, and increase the risk for paying off its obligations (Kurnia & Tandiontong, 2015) (Supriani & Pernamasari, 2021) (Khakwani, SadiqShahid, & Hamza, 2016).The opposite result shows that there is no influence between DER and MVA (Fauziah & Sukmaningrum, 2020) (Pambudi, 2023).
Effect between CR and TATO with MVA found no positive influence (Kurnia & Tandiontong, 2015) where it is hoped that when M&A is carried out, positive CR and TATO values will also provide added value for the company.Likewise, it is hoped that the influence between OCF and MVA when carrying out M&A is expected, that the higher the value of OCF can have a positive influence or increase company performance but found a negative influence or no effect (Sunarko & Martini, 2018).
From those explanation, the hypotheses that can be formed: H1=EVA in non-bank company that carry out M&A has positive effect on MVA.
H2=CR in non-bank company that carry out M&A has positive effect on MVA.
H3=DER in non-bank company that carry out M&A has negative effect on MVA.
H4=TATO in non-bank company that carry out M&A has positive effect on MVA.
H5=EPS in non-bank company that carry out M&A has positive effect on MVA.
H6=ROE in non-bank company that carry out M&A has positive effect on MVA.
H7 =OCF in non-bank company that carry out M&A has positive effect on MVA

Sample Selection
In this study, researchers want to see the effect between EVA, CR, DER, TATO, EPS, ROE, and OCF to MVA.The point of view taken by the researcher is the point of view of the party taking over and using nonprobability sampling with the method used is purposive sampling.The data taken is secondary from Indonesia Competition Commission (KPPU) M&A notification list from 2016 to 202 and accessing the IDX database to retrieve open financial data on non-bank companies (Tbk.).Researchers take the five-year time period before and after the M&A by the acquiring company as a long-term period for the effects that can occur on M&A, so the research will be

Dependent and Independent Variable
There are seven independent variables in this study that expected to have influence with MVA, namely EVA, CR, DER, TATO, EPS, ROE, and OCF (Table 1. 1).
Meanwhile, the dependent variable is MVA, that shows how much the market value of a company; what is the net present value of all the company's projects (past and present).with the criteria for testing the t statistic with an alpha level (α) = 0.05.

a. Data Analysis Results
From the results of descriptive statistics (Table 1.2), overall research data is normally distributed because it has a standard deviation value that is lower than the average value.So, from this test it is continued with testing the classical assumptions and testing the model.In the normality test (Table 1.3) it was found that the probability value of JB > 0.05 is 0.222686, so it can be concluded that the residuals are normally distributed.
From a literature review and based on previous research, the influence between EVA and financial ratios to MVA varies.Several studies have found a positive effect between EVA and MVA(Faiteh & Aasri, 2023) (Kumar, Bhatia, & Chattopadhyay, 2022) (Supriani & Pernamasari, 2021) (Nakhaei & Hamid, 2013) which means This research intends to contribute especially to companies that carry out M&A in https://jurnal.umt.ac.id/index.php/dmj/index191 However, there is a debate in the empirical literature that measures between EVA and traditional indicators are better at explaining the creation of market value, many studies have been carried out on other variables on MVA, because a weak effect was found between EVA and MVA.MVA is considered to have the highest effect with EVA than other financial measurements.At first glance, a metric like EVA should lead to an Management Journal Volume 7 No. 2 Tahun 2023 DOI: http://dx.doi.org/10.31000/dmj.v7i2ISSN (Online) 2580-2127 https://jurnal.umt.ac.id/index.php/dmj/index192

Table 1 . 1 Operationalization of Research Independent & Dependent Variables
which assumes that there are no individual or temporal differences in effects, or the Fixed Effect (FEM) model with the LSDV Approach which assumes that there is a different effect on the model between individual units or between time units on the model or the Random Effect model with Generalized Least Square (GLS) which calculates that every error that occurs maybe it has something to do in cross section and time series.So that the random effect model can resolve an uncertainty from the model of the fixed effect.To determine the appropriate model for the study, three model suitability tests were carried out: Chow test to determine whether the FEM model was better than the CEM model, Hausman test to determine the best model comparison between the REM and FEM models, and Lagrange Multiplier test to determine choose the better model between CEM and REM.Hypothesis testing in this research includes simultaneous and individual testing, where the F-Statistics test is carried out as a Simultaneous Significant Test to show whether all independent variables or predictors included in the model have a combined effect with the F-Statistics testing criteria with alpha level (α) = 0.05; with hypothesis: H0: EVA, CR, DER, TATO, EPS, ROE and OCF do not have a major effect on MVA H1: EVA, CR, DER, TATO, EPS, ROE and OCF have a major effect on MVA While the statistical t test is carried out for the Partial/Individual Significance test, https://jurnal.umt.ac.id/index.php/dmj/index195 To estimate model parameters using panel data, there are several methods that can be used, Common Effect Model (CEM)/Ordinary Least Square (OLS) method https://jurnal.umt.ac.id/index.php/dmj/index196