THE EFFECTS OF DIGITAL MATURITY AND FINANCIAL PERFORMANCE ON STOCK RETURN: EVIDENCE FROM INDONESIAN TECH PUBLIC COMPANIES

• Main Author: Kusuma Dana Artha, Made
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/65464
• Institution: Institut Teknologi Bandung

As the business landscape changes to digital, many companies apply new business strategies to create a better position in the market. As a part of new technology, digital transformation could become more accessible to scale-up businesses at a lower cost. In Indonesia alone, the technology companies are still growing. Although digital technology trends are new, the technology sector is categorized as a good performer, measured by the vast stock return. The technology company's value is not based solely on its current profitability but also on what it will create in the future, as its focus is on expansion and growth rather than monetization. Moreover, most cases reveal that the tech companies' financial performance still has a negative value on the bottom line. Thus, this is the opportunity to find out the most significant factor influencing the stock return in the technology sector and the sector that adopts digital technology for the operational basis, especially in Indonesia, because there has never been any study to research these problems before. In addition, the results of this study may help investors invest their money wisely, and managers highlight the most significant factors to influence stock returns in technology companies positively. This study uses technology companies and companies that have a high digital maturity index recorded from 2016 to 2020 with a total sample of 10 companies. Digital maturity measurement using textual quantification method or text query in the annual report. The number of digital activities mentioned is quantified using a tercile-based to avoid noise. Panel data regression is used as data analysis with a Common Effect Model. The results show that digital maturity and profitability as measured by Return-on-Asset (ROA) have no significant effect on stock returns. On the other hand, Sales Growth has a significant positive effect on stock returns. Therefore, investors and managers can consider aspects of sales growth to get a good stock return performance in technology companies. However, sales growth is susceptible to the company's external factors, so managers must focus on variables that affect sales growth. Keywords: Technology Companies, Digital Maturity, Profitability, Sales Growth, Stock Return