Firm Innovation, Managerial Ability, Size and Leverage: Impact on Firm Performance

Abstract

Competitive superiority is a way for companies to sustain business performance. RBV theory states that unique resources provide a competing advantage. This study looks at the impact of different factors, including firm innovation, management skill, size, and leverage, on the firm's financial performance as assessed by ROA, ROE, and NPM. The quantitative approach was used to utilize the population of firms listed on the Indonesia Stock Exchange from 2012 to 2022. Both the www.idx.co.id website and datastream were used to obtain the data. There were 87 samples of qualified companies for further investigation. The results showed that managerial ability, size, and leverage variables significantly affected firm performance (ROA and ROE). On the other hand, the firm innovation variable did not affect either ROA or ROE. In model 3 for NPM testing, only size and leverage variables could influence NPM. In contrast, firm innovation and managerial ability variables had no significant impact on NPM. Overall, the average research variables used were only able to influence firm performance (measured by ROA, ROE, and NPM) by 2%-5%.