THE RELATIONSHIP BETWEEN SELECTED FINANCIAL RATIOS AND STOCK RETURNS OF PUBLICLY LISTED CONSUMER COMPANIES IN LQ45 INDEX

• Main Author: Bernike Hutapea, Irene
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/79833
• Institution: Institut Teknologi Bandung

Within the last three years, the global trends have been influenced by a few of influencing factors, among others, are the COVIC-19 pandemic and the Ukraine-Russia war. These unprecedented events have disrupted the supply chain, causes heightened degrees of inflation and thus increases the prices of commodity. In the year of 2022, it is noted that the global inflation was at a three-decade high. In the midst of the rising inflation, it can be derived that the consumer confidence in Indonesia has depicted a stable condition. This can be shown by the Consumer Confidence Index (CCI) that has proven a relatively stable trend with a CAGR of 0.02% during the year of 2022. This is in contrast with the inflation spike in 2022 and the high inflation rate in the end of 2022 which is at 4% high. Based upon the information of the CCI, the stocks of consumer companies in Indonesia are still attractive for their investors. The selection process for the investors can be narrowed down to using available stock indexes that are available in the market. The LQ45 Index is one option in selecting large caps stocks. Furthermore, there are various methods that are being used by investors in order to determine whether a company stock will generate a good return. In this research, the researcher chooses to highlight the benefit of knowing the relationship between financial ratios of a company and the stock returns of the same company. This research focuses in analyzing the relationship between selected financial ratios which are Current Ratio (CR), Liabilities to Assets (LTA), Return on Asset (ROA), Net Profit Margin (NPM), Dividend Payout Ratio (DPR) and the Stock Returns of the consumer companies that are listed in LQ45 Index in the period from 2017 to 2022. All the data is analyzed by means of EVIEWS 10 with multiple regression analysis method. In order to complete the analysis, assumption tests, coefficient of determination test, and hypothesis tests are also being performed in this research. The result of this research has proven that ROA, NPM, and DPR do have a significant relationship toward the Stock returns of the consumer companies listed in LQ45 Index for the period of February 2023 – July 2023, of the index. While, CR and LTA do not have a significant relationship toward the same. All the independent variables simultaneously influence Stock Return. The dependent variable of this research (Stock returns) can be explained by as much as 37.8502% by the independent variables of this research (CR, LTA, ROA, NPM, and DPR), while the remaining 62.1498% is influenced by other variables outside of this research.