THE EFFECT OF COMPANY SIZE AND SALES GROWTH ON ROE IN FOOD AND BEVERAGE COMPANIES (2021–2024)

Abstract

This study examines the effect of firm size and sales growth on return on equity (ROE) in food and beverage sub-sector companies listed on the Indonesia Stock Exchange over the 2021–2024 period. The sample consists of 14 firms, yielding 56 firm-year observations of balanced panel data. Panel regression analysis is employed, and model selection tests indicate that the Fixed Effect Model (FEM) is the most appropriate specification, as evidenced by a significant Chow test (F = 3.8909; p = 0.0005) and Hausman test (Chi-Sq = 9.7833; p = 0.0075). The classical assumption tests show no multicollinearity between the independent variables (correlation between firm size and sales growth = 0.047 < 0.85) and no evidence of heteroskedasticity, supporting the use of FEM estimators. The estimation results reveal that firm size has a negative and statistically significant impact on ROE (coefficient = −6.35E−08; t = −2.2616; p = 0.0292), while sales growth exerts a positive but statistically insignificant effect (coefficient = 0.0267; t = 0.3897; p = 0.6988). The model's R-squared is 0.5950, with an adjusted R-squared of 0.4432, indicating that approximately 44–60% of the variation in ROE is explained by the explanatory variables and firm-specific fixed effects; the F-statistic of 3.9182 (p = 0.000276) confirms overall model significance. These findings suggest that larger asset scale in food and beverage firms tends to reduce equity returns, whereas higher sales growth does not necessarily translate into higher ROE. The results highlight the importance of asset efficiency and cost management, beyond just expansion of firm size or top-line growth, for improving shareholder returns in this sector