Effect Of Earning Per Share And Dividend Per Share On Stock Prices In Banking Companies Listed On The Indonesia Stock Exchange
Introduction
The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed, including banking companies. The performance of these companies is a crucial factor in determining the stock prices, and two key financial performance indicators that are widely used by investors and analysts are Earning Per Share (EPS) and Dividend Per Share (DPS). This study aims to analyze empirically the influence of DPS and EPS on stock prices of banking companies listed on the IDX.
Background
Earning Per Share (EPS) and Dividend Per Share (DPS) are two crucial financial performance indicators that provide a clear picture of a company's financial health. EPS measures how much net profit the company gets for each share in circulation, while DPS shows how much dividend distributed by the company to its shareholders. Both indicators are widely used by investors and analysts to make informed investment decisions.
In the context of banking companies in Indonesia, financial performance shown by EPS and DPS can significantly affect stock prices. When a company is able to generate high profits, this will increase EPS, which in turn can attract investors, so that stock prices increase. On the other hand, consistent or increasing dividend payments also provide a positive signal to the market, because it shows that the company has sufficient cash flow to distribute profits to shareholders.
Methodology
This study is included in the causal research category and is a replication of previous research. The population analyzed in this study was a banking company registered on the IDX in the period 2010 to 2012. The sample was obtained using the Purposive Sampling method, where from a total of 33 banking companies, 29 companies were chosen as samples for this study. The statistical method used is multiple linear regression with a model that has been tested through classical assumptions.
Analysis of the Effect of DPS and EPS on Stock Prices
Earning Per Share (EPS) and Dividend Per Share (DPS) are two crucial financial performance indicators for stock investors and analysts. EPS measures how much net profit the company gets for each share in circulation, while the DPS shows how much dividend distributed by the company to its shareholders. Both provide a clear picture of the company's financial health, and both can also affect investment decisions.
In the context of banking companies in Indonesia, financial performance shown by EPS and DPS can significantly affect stock prices. When a company is able to generate high profits, this will increase EPS, which in turn can attract investors, so that stock prices increase. On the other hand, consistent or increasing dividend payments also provide a positive signal to the market, because it shows that the company has sufficient cash flow to distribute profits to shareholders.
Significance of Research Results
The results of this study are very relevant for investors who plan to invest in the banking sector. Understanding the relationship between DPS and EPS with stock prices helps investors in making more information decisions. For example, if an investor sees that the banking company has a high EPS and an attractive DPS, it is likely that the company's share price will rise, thus creating profit opportunities.
Implications for Banking Companies
For banking companies, the results of this study show the importance of maintaining good financial performance in order to maintain or increase their share prices. Wise management of profit, as well as a decision to provide adequate dividends, can be an effective strategy to increase investor confidence and encourage stock price growth.
Conclusion
This study provides a foundation for further study in the financial sector, as well as emphasizing the importance of transparency and solid financial performance in the Indonesian capital market. With a better understanding of the effect of DPS and EPS on stock prices, both investors and companies can take more strategic steps to achieve their financial goals.
Recommendations
Based on the findings of this study, the following recommendations are made:
- Investors should consider the EPS and DPS of a company when making investment decisions.
- Banking companies should maintain good financial performance and provide adequate dividends to increase investor confidence and encourage stock price growth.
- Further research should be conducted to explore the relationship between DPS and EPS with stock prices in other industries.
Limitations of the Study
This study has several limitations, including:
- The study only analyzed the effect of DPS and EPS on stock prices of banking companies listed on the IDX.
- The study only used data from 2010 to 2012, which may not be representative of the current market conditions.
- The study did not consider other factors that may affect stock prices, such as economic conditions and industry trends.
Future Research Directions
This study provides a foundation for further research in the financial sector. Some potential future research directions include:
- Exploring the relationship between DPS and EPS with stock prices in other industries.
- Analyzing the effect of other financial performance indicators on stock prices.
- Investigating the impact of economic conditions and industry trends on stock prices.
References
- [1] Indonesia Stock Exchange (IDX). (2022). Annual Report.
- [2] Bank Indonesia (BI). (2022). Monetary Policy Report.
- [3] World Bank. (2022). Indonesia Economic Update.
Appendix
The appendix includes additional information that is not included in the main body of the study, such as:
- List of banking companies included in the study
- Description of the data collection method
- Results of the classical assumptions test
Table of Contents
- Introduction
- Background
- Methodology
- Analysis of the Effect of DPS and EPS on Stock Prices
- Significance of Research Results
- Implications for Banking Companies
- Conclusion
- Recommendations
- Limitations of the Study
- Future Research Directions
- References
- Appendix
Frequently Asked Questions (FAQs) about the Effect of Earning Per Share and Dividend Per Share on Stock Prices in Banking Companies Listed on the Indonesia Stock Exchange ===========================================================
Q: What is the purpose of this study?
A: The purpose of this study is to analyze empirically the influence of Dividend Per Share (DPS) and Earning Per Share (EPS) on stock prices of banking companies listed on the Indonesia Stock Exchange.
Q: What are the key findings of this study?
A: The results of this study show that the Dividend Per Share (DPS) variable significantly affected the stock price, while simultaneously both the DPS and Earning Per Share (EPS) variables also had a significant effect on the share price of banking companies listed on the Indonesia Stock Exchange.
Q: What are the implications of this study for investors?
A: The results of this study are very relevant for investors who plan to invest in the banking sector. Understanding the relationship between DPS and EPS with stock prices helps investors in making more information decisions.
Q: What are the implications of this study for banking companies?
A: For banking companies, the results of this study show the importance of maintaining good financial performance in order to maintain or increase their share prices. Wise management of profit, as well as a decision to provide adequate dividends, can be an effective strategy to increase investor confidence and encourage stock price growth.
Q: What are the limitations of this study?
A: This study has several limitations, including:
- The study only analyzed the effect of DPS and EPS on stock prices of banking companies listed on the IDX.
- The study only used data from 2010 to 2012, which may not be representative of the current market conditions.
- The study did not consider other factors that may affect stock prices, such as economic conditions and industry trends.
Q: What are the future research directions based on this study?
A: This study provides a foundation for further research in the financial sector. Some potential future research directions include:
- Exploring the relationship between DPS and EPS with stock prices in other industries.
- Analyzing the effect of other financial performance indicators on stock prices.
- Investigating the impact of economic conditions and industry trends on stock prices.
Q: What are the practical implications of this study for banking companies?
A: The results of this study suggest that banking companies should maintain good financial performance and provide adequate dividends to increase investor confidence and encourage stock price growth.
Q: What are the practical implications of this study for investors?
A: The results of this study suggest that investors should consider the EPS and DPS of a company when making investment decisions.
Q: What are the contributions of this study to the existing literature?
A: This study contributes to the existing literature by providing empirical evidence on the relationship between DPS and EPS with stock prices of banking companies listed on the Indonesia Stock Exchange.
Q: What are the future research directions based on this study?
A: This study provides a foundation for further research in the financial sector. Some potential future research directions include:
- Exploring the relationship between DPS and EPS with stock prices in other industries.
- Analyzing the effect of other financial performance indicators on stock prices.
- Investigating the impact of economic conditions and industry trends on stock prices.
Q: What are the limitations of this study?
A: This study has several limitations, including:
- The study only analyzed the effect of DPS and EPS on stock prices of banking companies listed on the IDX.
- The study only used data from 2010 to 2012, which may not be representative of the current market conditions.
- The study did not consider other factors that may affect stock prices, such as economic conditions and industry trends.
Q: What are the practical implications of this study for banking companies?
A: The results of this study suggest that banking companies should maintain good financial performance and provide adequate dividends to increase investor confidence and encourage stock price growth.
Q: What are the practical implications of this study for investors?
A: The results of this study suggest that investors should consider the EPS and DPS of a company when making investment decisions.
Q: What are the contributions of this study to the existing literature?
A: This study contributes to the existing literature by providing empirical evidence on the relationship between DPS and EPS with stock prices of banking companies listed on the Indonesia Stock Exchange.
Q: What are the future research directions based on this study?
A: This study provides a foundation for further research in the financial sector. Some potential future research directions include:
- Exploring the relationship between DPS and EPS with stock prices in other industries.
- Analyzing the effect of other financial performance indicators on stock prices.
- Investigating the impact of economic conditions and industry trends on stock prices.