Analysis Of Factors Affecting Stock Returns (Case Study Of IPO Company 2014-2016 On The Indonesia Stock Exchange)

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Analysis of Factors Affecting Stock Returns: Case Study of 2014-2016 IPO Company on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) has experienced significant growth in recent years, with an increasing number of companies conducting initial public offerings (IPOs). This growth has led to a greater demand for research on the factors that affect stock returns, particularly in companies that have just gone public. Understanding the factors that influence stock returns is crucial for investors and financial practitioners, as it enables them to make informed decisions and maximize their returns.

Background

The Indonesia Stock Exchange is one of the largest stock exchanges in Southeast Asia, with a market capitalization of over $500 billion. The exchange has experienced significant growth in recent years, with the number of listed companies increasing from 300 in 2010 to over 600 in 2020. The growth of the IDX has led to an increase in the number of companies conducting IPOs, with over 100 companies listing on the exchange between 2014 and 2016.

Research Objectives

The primary objective of this study is to analyze the factors that affect stock returns in companies that conducted IPOs between 2014 and 2016 on the Indonesia Stock Exchange. The study aims to identify the independent variables that have a significant impact on stock returns, including Return on Assets (ROA), Debt Equity Ratio (DER), and Earnings Per Share (EPS).

Methodology

This study uses a quantitative descriptive research approach, with a population of 54 companies that conducted IPOs between 2014 and 2016. The sample size was determined using purposive sampling, with four criteria used to select 15 companies that were made the object of research. The data used in this study is secondary data originating from the company's financial statements.

Data Analysis

The data analysis was conducted using two main techniques: descriptive analysis and panel data regression analysis. The panel data regression analysis was carried out using EViews 10 software, which allowed researchers to process and analyze data more effectively.

Research Results

The results of this study show that partially, the ROA and EPS variables have a positive and significant influence on stock returns. This indicates that the higher the company's ROA and EPS, the greater the return expected by investors. Conversely, the DER shows a significant negative effect on stock returns, indicating that an increase in debt relative to equity can reduce investor confidence in the company, resulting in a decline in stock returns.

Analysis and Implications

This analysis highlights the importance of company financial performance in influencing investment decisions. The high ROA reflects management efficiency in using assets to generate profits, while high EPS shows the company's ability to provide returns to shareholders. On the other hand, the high DER shows that the company uses more debt in its financing structure, which can be a sign of a higher financial risk.

Investment Implications

Investors should consider these factors when making investment decisions, especially in companies that have just gone public. This study provides valuable insights on how companies conducting IPOs in the 2014-2016 period can maximize their stock returns by managing assets, debts, and profits generated.

Conclusion

The results of this study are expected to provide a better understanding for investors and financial practitioners regarding factors that affect stock returns, as well as the importance of good management in newly registered companies in the stock market. This study contributes to the existing body of knowledge on stock returns and provides a framework for future research on this topic.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Investors should consider the company's financial performance when making investment decisions, particularly in companies that have just gone public.
  2. Companies conducting IPOs should prioritize good management to maximize their stock returns.
  3. Financial practitioners should consider the factors that affect stock returns when advising clients on investment decisions.

Limitations

This study has several limitations, including:

  1. The sample size was limited to 15 companies, which may not be representative of all companies that conducted IPOs between 2014 and 2016.
  2. The study only analyzed the factors that affect stock returns and did not consider other factors that may influence investment decisions.

Future Research Directions

This study provides a framework for future research on stock returns and the factors that affect them. Future studies should consider the following research directions:

  1. Analyzing the impact of other factors on stock returns, such as market conditions and economic indicators.
  2. Examining the relationship between stock returns and other financial metrics, such as dividend yield and price-to-earnings ratio.
  3. Investigating the impact of regulatory changes on stock returns and the factors that affect them.
    Q&A: Analysis of Factors Affecting Stock Returns

Introduction

In our previous article, we analyzed the factors that affect stock returns in companies that conducted initial public offerings (IPOs) between 2014 and 2016 on the Indonesia Stock Exchange. This article provides a Q&A section to further clarify the findings and implications of the study.

Q: What are the main factors that affect stock returns?

A: The main factors that affect stock returns in this study are Return on Assets (ROA), Debt Equity Ratio (DER), and Earnings Per Share (EPS). These factors are significant in determining the stock returns of companies that have just gone public.

Q: What is the relationship between ROA and stock returns?

A: The study found that ROA has a positive and significant influence on stock returns. This means that companies with high ROA are expected to have higher stock returns, as they are able to generate profits efficiently.

Q: What is the relationship between DER and stock returns?

A: The study found that DER has a negative and significant influence on stock returns. This means that companies with high DER are expected to have lower stock returns, as they are more likely to have financial difficulties and reduce investor confidence.

Q: What is the relationship between EPS and stock returns?

A: The study found that EPS has a positive and significant influence on stock returns. This means that companies with high EPS are expected to have higher stock returns, as they are able to provide returns to shareholders.

Q: What are the implications of this study for investors?

A: The study provides valuable insights for investors on the factors that affect stock returns. Investors should consider the company's financial performance, particularly ROA, DER, and EPS, when making investment decisions.

Q: What are the implications of this study for companies conducting IPOs?

A: The study highlights the importance of good management in companies conducting IPOs. Companies should prioritize efficient asset management, manage debt levels, and provide returns to shareholders to maximize their stock returns.

Q: What are the limitations of this study?

A: The study has several limitations, including a limited sample size and a focus on a specific time period. Future studies should consider a larger sample size and a longer time period to provide more generalizable findings.

Q: What are the future research directions for this study?

A: Future studies should consider the following research directions:

  1. Analyzing the impact of other factors on stock returns, such as market conditions and economic indicators.
  2. Examining the relationship between stock returns and other financial metrics, such as dividend yield and price-to-earnings ratio.
  3. Investigating the impact of regulatory changes on stock returns and the factors that affect them.

Conclusion

This Q&A section provides further clarification on the findings and implications of the study. The study highlights the importance of company financial performance in influencing investment decisions and provides valuable insights for investors and companies conducting IPOs.