THE EFFECT OF KEY FINANCIAL RATIOS TO SHARE RETURN IN THE COMPANIES LISTED ON LQ45 INDEX INDONESIAN STOCK EXCHANGE (IDX)

• Main Author: Anggraeni Novianti, Dwi
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/35777
• Institution: Institut Teknologi Bandung

Indonesia’s economy was recognized internationally when its country credit ratings was recently upgraded by international financial services company such as Standard & Poor’s, Fitch Ratings and Moody’s. This was due to firm economic growth, low government debt to GDP and discreet fiscal management. From Standard & Poor’s credit rating Indonesia get BBB- with stable outlook, Moody’s investor service for Indonesia is Baa2 with positive outlook, and Fitch ratings is BBB with stable outlook. A country credit rating is used by wealth funds, pension funds and other investors to measure the credit worthiness as well as the investment grade of Indonesian companies. Analysts say that Indonesia will become very strong economically. The capital market is an important part for the economy of a country, and stocks are one of its most popular financial instruments. Jakarta Composite Index (JCI) reflected that Indonesia stock market is growing rapidly in the number of investors, amount of transactions and market capitalization. This is thanks to IDX’s drive to educate the public and to promote investment in the capital market. Indonesian Stock Exchange (IDX) continues to grow more quickly than the majority of markets in developed and developing economies – not just in Asia, but in around the world. In this study, the writer has conducted a regression analysis to determine the relationship between share return and selected financial ratios namely Earning Per Share (EPS), Price Earning Ratio (PER), Price to Book Value (PBV), Debt to Equity Ratio (DER), Net Profit Margin (NPM) and Return on Equity (ROE) of companies listed as LQ45 in Indonesia Stock Exchange for the period of 2013 – 2017. Data that used by the writer is secondary data from several sources such as Indonesia Stock Exchange (IDX), the company financial statement and the other reliable sites. The populations for this study are from 19 companies listed in LQ45 Index for the period of 2013 to 2017. This study confirm that DER, NPM, EPS, PER and PBV individually have positive significant effect on the Share Return and ROE has a negative significant effect on the Share Return. Likewise, that the variables DER, NPM, ROE, EPS, PER and PBV simultaneously influence the Share Return. For potential investor the result from this study is important to make decision in stock market transaction and it also give benefit to publicly-listed companies to improve their financial performance.