Effect of the New Standard of Leasing (PSAK 73 Adopts IFRS 16) on Firm Value During the Covid-19 Pandemic

Abstract

Purpose: This research aims to examine impact of high lease numbers based on PSAK 73 and PSAK 30 on firm value. Theoretical framework: The PSAK 73 (IFRS 16 adoption) mandates the reclassification of operating leases as finance leases, leading to an increase in both assets and liabilities of the company. This change, coupled with the challenging economic conditions caused by the Covid-19 pandemic, can lead into a potential decrease in firm's value. Design/methodology/approach: The study uses purposive sampling of firms unaffected during the pandemic, such as food and beverage, agriculture, telecommunications, chemical, and pharmaceutical subsectors listed on Indonesia Stock Exchange (IDX) from 2017 to 2021 and multiple regression is used to test the hypothesis Findings: The research findings suggest a positive relationship between the increase in lease amounts under PSAK 73 and firm value during the pandemic in Indonesia. Additionally, the study reveals a negative relationship between lease amounts under the old standard and firm value prior to the pandemic. Research, Practical, & Social Implications: The implementation of PSAK 73 in 2020 is appropriate, it has a positive effect on firm value Originality/value: The study’s originality is the impact of PSAK 73 on firm value in abnormal economic conditions that have not been done in previous research.