The effect of return on equity, price to earnings ratio, debt to equity ratio and market value added toward stock return

Nora, Nora (2019) The effect of return on equity, price to earnings ratio, debt to equity ratio and market value added toward stock return. Bachelor thesis, Universitas Pelita Harapan.

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Abstract

The aim of this study is to examine and analyze the effect of return on equity (ROE), price to earnings ratio (PER), debt to equity ratio (DER), and market value added (MVA) toward stock return for the companies registered in LQ 45 index and listed in IDX for the period 2013-2017. Signaling theory is the information obtained from the fundamental analysis that provitdes a signal for investors as an insight to make a better decision in their investment. This research data used secondary data obtained from the financial report issued by IDX and the website of the company that published a financial statement. The research design and the sampling techniques use quantitative method and purposive sampling method, with a total sample of 105. The analysis technique used are multiple linear regression, T-test, and F-test and the research also used moderate negative skewness as a transformation method to analyze the data. The result of this research shows that both PER and DER has a positive relationship and partial significant effect toward stock return, while ROE has a negative effect and not significant towards stock return. MVA has a positive relationship but not significant towards stock return. Simultaneously, there was an effect of ROE, PER, DER, and MVA toward stock return at α = 0.05. The adjusted R2 in this study was 0.8, which depict that the ability of independent variables in explaining the variation of the dependent variable is 8% and the remaining 92% is explained by other independent variables outside the model. Even though, both ROE and MVA do not have a significant effect toward stock return, the company and investors still consider ROE and MVA as important factor in determining the and performance of the company to achieve high return.

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