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This study aims to analyze the effect of asset structure (LTA), earnings volatility (CV-ROA), and financial flexibility (CAR) on firm value (PBV), with capital structure (EAR) serving as a mediating variable, in banking sub-sector companies listed on the Indonesia Stock Exchange over the 2018–2025 period. The banking sector was selected due to its systemic role in the economy and its unique characteristics, including the predominance of financial assets, stringent regulations, and sensitivity to macroeconomic conditions. This research addresses the gap in previous studies that focused solely on non-financial sectors and did not examine the mediating role of capital structure.
The theoretical framework integrates signaling theory, trade-off theory, and pecking order theory. Asset structure is measured by LTA, earnings volatility by the coefficient of variation of ROA, financial flexibility by CAR, and capital structure by EAR. The use of EAR is more relevant for banking compared to DER, as it is more stable and aligned with regulatory requirements. This research employs a quantitative explanatory causal approach. A sample of 40 banking companies was selected through purposive sampling over 8 years, yielding 320 panel data observations. Secondary data were obtained from audited financial reports and stock prices on the IDX. Analysis utilizes panel data regression with CEM, FEM, and REM approaches, along with Baron & Kenny mediation testing and 5,000-replication bootstrap. Control variables include firm size and firm growth. This study is expected to provide theoretical contributions to the testing of capital structure theories in banking, as well as practical benefits for investors, bank management, and regulators in decision-making and policy formulation.