IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 23, Issue 2. Ser. III (February 2021), PP 10-19 www.iosrjournals.org DOI: 10.9790/487X-2302031019 www.iosrjournals.org 10 | Page The Influence of Financial Performance and Dividend Policy on Firm Value: Study on Lq-45 Companies Listed In Idx 2016-2018 Dian Feriswara 1 , Edwin Agus Buniarto 2 1) Universitas Dr. Soetomo Surabaya 2) Universitas Islam Kadiri, Kediri Abstract.The purpose of this study was to examine and explain the effect of Financial Performance and Dividend Policy on Firm Value. This research is explanatory or confirmatory which provides a causal explanation or influence between variables, through hypothesis testing. The data analysis method used Generalized Structured Component Analysis (GSCA). The research findings show that Financial Performance has a positive and significant effect on Firm Value. The Dividend Policy variable has a positive and insignificant effect on Firm Value. Keywords: Financial Performance, Dividend Policy, Firm Value -------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 28-01-2021 Date of Acceptance: 12-02-2021 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction The main objective of the company from a financial perspective is to maximize the prosperity of the company owners (shareholders), which is shown by the increase in firm value, which is reflected in the company's stock price. Firm value can provide maximum prosperity for shareholders if the share price increases. The higher the share price of a company, the higher the prosperity of the shareholders. The share price of a company is also a reflection of the success of the strategic financial decisions made by the company's management. The success of the strategic financial decisions made by company management. The success of management in carrying out its duties can be assessed from the stock market price or the value of ordinary shares, which is the right index to measure the success of achieving company goals (increasing firm value). Firm value is the price a prospective buyer is willing to pay if the company is sold. Firm Value is the selling price if the company is sold, which not only reflects the value of the company's assets but also the level of business risk, company prospects, management, business environment, and other factors if the company has not gone public. (Husnan, 2001). For companies that have go public, maximizing firm value is often expressed in terms of maximizing share value, which is measured by the Price Book Value. Price Book Value shows the comparison between a company's stock performance in the stock market and its book value. The higher the resulting price book value, it shows that the company's future performance is considered more prospective by investors. (Warsono, 2003) If the company operates and develops, the value of the shares will increase, on the other hand, if the company does not develop, the value of the company's shares will decrease, which in turn will affect the Firm Value. There are many determinants that affect firm value, one of which is financial performance. For a company, maintaining and improving financial performance is a must, so that these shares continue to exist and remain in demand by investors. Financial reports published by the company reflect the company's financial performance. This financial information has a function as a means of information, a tool of management accountability to the owner of the company, a description of the company's success indicators and as a material for consideration in decision making. (Harahap, 2004). From the financial statements which are then used financial ratios, it can be seen whether the company is operated efficiently and effectively. The ratio used in this study, namely the rate of return on assets and the rate of return on equity, can be a tool to measure the level of efficiency and effectiveness. Financial Performance of a company that influences increasing firm value. The level of firm value becomes the benchmark for investors to invest, this illustrates the market value of a company in increasing the attractiveness of investors. Firm value can be measured by the Tobin's Q formula. An increasing stock price indicates an increase in Firm Value. When the share price increases, the shareholders will increase in prosperity. Signaling theory (Ross, 1977) explains the reasons why companies provide financial statement information to outside parties such as the capital market and how companies should provide signals to users of financial reports. Signal theory shows the asymmetry of information between company management and the parties that have an interest in that information. To reduce information asymmetry, financial information is provided to outside parties. With reduced information asymmetry, Firm Value can increase.