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Eppian Tamba Universitas Darma Agung
Article Info ABSTRACT
Article history:
Received April 2020 Revised May 2020 Accepted June 2020
Textile Company is one of the major industries listed on the Indonesia Stock Exchange which has experienced good development from year to year. For this reason, before renting capital by buying shares, an investor can analyze information on the financial performance of other companies, Current Ratio, Debt Equity Ratio and Return On Equity so that potential investors can obtain what is needed. The theory used in this study is a theory related to CR, DER and ROE. The purpose of this study is to prove whether or not the influence of CR, DER and ROE on stock prices in textile companies listed on the Indonesia Stock Exchange for the 2016-2020 period. The total population of all research is 18 companies. The sampling method used is purposive sampling technique. The total sample size is 8 companies. Quantitative data is data used in research. technical data collection using technical documentation by browsing www.idx.co.id. The data analysis technique used EVIEWS 10 in testing panel data regression, F test and t test. The results of this study prove that simultaneously CR, DER and ROE have a significant effect on stock prices. The results of the study partially prove that CR and DER have no and significant effect on the influencing variables, and ROE has a positive and significant effect on stock prices. The coefficient of determination shows a numerical value of 66%, the remaining 34% is explained by other variables that do not have to be studied.
Keywords:
Current ratio debt to equity ratio return on equity share price
This is an open access article under the CC BY-SA license.
Corresponding Author:
Eppian Tamba
Universitas Darma Agung Email: [email protected] INTRODUCTION
The Capital Market has a very important function for the economy of every country. The capital market is a market that trades various types of long-term financial instruments, both debt securities (bonds), stocks, mutual funds, and derivative instruments. The capital market is used to invest for those who have excess funds (investors) and those who lack funds (issuers) can be used to earn profits. One of the big factors that are currently being considered is that the rupiah exchange rate against the US dollar is falling, if the rupiah exchange rate drops it will result in many potential investors canceling shares, so that the JCI is unstable. The declining condition of the Indonesian capital market was also caused by the domestic economic turmoil, namely the current deteriorating economic conditions. The results of the report on economic growth in the first semester of which the results were slightly weaker than the previous period. Textile Company Growth Graph is presented in Figure 1 below:
Source: www.dataindusti.com Figure 1 Textile Company Growth Chart
From the graph above we can see that the Gross Domestic Product (GDP) at constant prices from 2010 was Rp.132.4 in trillion. From the graph, the growth data of Textile Companies is not stable, which can be seen in 2015 experiencing a temporary decline from 2016 to 2019, experiencing an increase, in 2020 experiencing a drastic decline.
To find out the price in selling and buying shares, it is necessary to pay attention to its financial performance.
The way to find out more specific information is to do a financial ratio analysis. Ratios that can be used as parameters to determine company value are Current Ratio (CR), Debt to Equity Ratio (DER) and Return On Equity (ROE).
Current Ratio (CR) shows how much the company's ability to pay off its short-term debt. The general standard used to measure the CR of a good company is at the 200% limit. If the Current Ratio (CR) of a company is above 200% (too liquid) then the company has large amounts of idle cash. This shows the inefficiency of cash management. When the company's Current Ratio (CR) is low, it means that the company is in a position of financial difficulty because at some point the company must pay its short-term debt.
Debt to Equity Ratio (DER) shows the composition of long-term debt to equity. Companies that have a high DER indicate that long-term debt is greater than their own capital. This will make investors unwilling to invest their funds in the company so that it will result in a decrease in the company's stock price. Based on this discussion, the Debt to Equity Ratio (DER) can be used as a consideration in investing in Textile company shares. The negative and significant coefficient value (α = 0.05) indicates that the DER has a negative effect on the company's stock price. The negative sign indicates that when the Debt to Equity Ratio (DER) increases, the stock price decreases, when the DER decreases and vice versa. The results of Sarah Agustina and Hendratno's research, The Effect of Current Ratio, Debt To Asset Ratio, Debt To Equity Ratio, Return On Assets, and Price Earning Ratio variables on Stock Prices in Plastic and Packaging Companies Listed on the Indonesia Stock Exchange (IDX) in 2012 -2016 shows that partially CR, DAR, DER do not have a significant effect on stock prices on the IDX, while PER has a significant effect. Simultaneously CR, DAR, DER and PER have no significant effect. Research has been carried out by Indra Setiyawan (2014), The effect of liquidity ratios, profitability ratios, and solvency ratios on stock prices in mining companies on the IDX in 2008-2012 CR and ROA have a negative and insignificant effect on stock prices and DER has no positive and significant effect to stock prices. Research by Dwi Murtiningsih Effect of ROA, ROE, Net Profit, and EPS on Stock Prices in Food and Beverage Companies on the Stock Exchange in 2008-2009. Management Dynamics. Case study of PT Unilever Indonesia Tbk The results show that partially, ROA ROE does not have a significant effect on stock prices. NPM, and EPS have a significant effect on stock prices. Research by Hendra Adhitya Wicaksono (2013) the effect of current ratio, debt to asset ratio, total asset turnover, return on equity, interest rates, foreign exchange rates, inflation, on stock prices of food and beverage companies listed on the Indonesia Stock Exchange in 2009-2011. There is a positive and significant effect of CR on stock prices, the DAR variable has a negative and insignificant effect on stock prices, the total asset turnover ROE variable has a significant and significant effect on stock prices. Martha and Meilin L. (2018) Analysis of the Effect of CR, DER, ROA, and PER on Stock Prices in Plantation Sector Companies Listed on the Indonesia Stock Exchange in 2010-2016 CR which has an influence on stock prices While DER, ROA and PER do not have impact on share prices in plantation sector companies on the Indonesia Stock Exchange. Research conducted by Ajeng Dewi Kurnianto (2013) Analysis of the effect of EPS, ROE, DER, and CR on stock prices ROE and DER have a negative and insignificant effect. Current Ratio has no significant effect on stock prices.
The inconsistency of the results of previous studies is the reason why researchers conduct research on "The Effect of Current Ratio (CR), Debt to Equity Ratio (DER) and Return on Equity (ROE) on Stock Prices (Empirical Study on Textile Companies Listed on the Indonesia Stock Exchange".
METHOD
This research was carried out at the Faculty of Economics, Darma Agung University from April to September 2021. The data used in this study is secondary which was collected from the financial statements of textile
Jurnal Ilmiah Socio Secretum, Vol. 10, No. 1, June 2020: 80-85 in testing panel data regression, F test and t test.
RESULTS AND DISCUSSION Panel Data Multigression Method
The multicollinearity test showed a correlation between the variables CR, DER and ROE. The development of the model resulted in the common effect model (CEM), Fixed effect model (FEM) and random effect model (REM). Model selection with Chows test and Hausman test. The results of the model selection are presented in table 1.
Table 1 Summary of Model Selection
The Chows test resulted in the selection of the best model, namely FEM. Based on the Hausman test the best model is FEM. Decisions can be taken from the two tests to produce the best FEM. The conclusion is that FEM is the best model in table 2.
In this model there is no problem of heteroscedasticity and autocorrelation. The resulting panel data regression equation that will be used in the next step is:
Y=1077.429-211.6734*CR-161.2071*DER+ 3156.888*ROE (3)
Constant value of 1077,429 If all the independent variables, namely Current Ratio (CR), Debt to Equity Ratio (DER) and Return On Equity (ROE) are assumed to be zero, there will be a constant value on the share price of Textile companies of 1077,429.
The regression coefficient value of the Current Ratio (CR) variable, shows the number -211.6734 where the coefficient with a negative sign means that the Current Ratio (CR) has the opposite effect on stock prices. So every increase in the Current Ratio (CR), by 1 unit, will reduce the stock price by 211,6734 units assuming other variables are zero.
The regression coefficient value of the Debt to Equity Ratio (DER) variable shows the number -23.8118 where the coefficient is negative which means that the Debt to Equity Ratio (DER) has the opposite effect on stock prices. So every increase in the Debt to Equity Ratio (DER) of 1 unit will reduce the stock price by 23,8118 units assuming other variables are zero.
The regression coefficient value of the Return On Equity (ROE) variable shows the number 3156,888 which means that every 1 unit increase in Return On Equity (ROE) will increase the stock price by 3156,888 units assuming other variables are zero.
Hypothesis testing
From the results of the partial t test on the current ratio variable, it is obtained t count of -1.1510 < t table of 2.131 with a significant level of 0.2951> 0.05 then H1 is rejected, which means CR has no effect on stock prices. From the results of the partial t test Debt to Equity Ratio obtained t count of -1.0315 < t table of 2.131 with a significant level of 0.3108> 0.05 then H1 is rejected. This means that DER has no effect on stock prices.
From the results of the partial test (t test) on the Return On Equity (ROE) variable, it is obtained that tcount is 4.2129 > ttable is 2.131 with a significance level of 0.0002 <0.05, then H1 is accepted.
The Prob value (F-statistic) is 0.0000 < 0.05, so that the CR, DER and ROE variables together have an effect on stock prices.
Adjusted R-squared value is 0.66 or equal to 66%. It means that the variable Y can be explained by CR, DER and ROE of 66%, the rest is explained outside the model.
Discussion
Effect of Current Ratio on Stock Price
From the results of the partial test (t test) on the Current Ratio (CR) variable, it was obtained that the thitug was -1.1510 < t table of 2.31 with a significant level of 0.259> 0.05 then H1 was rejected. Which means that CR has no effect on the stock price. this is the same as research conducted by Sarah Agustina, and Hendratno stated that the Current Ratio has no effect on stock prices.
Current Ratio (CR) shows how much the company's ability to pay off its short-term debt. There is no absolute provision about what level of CR is considered good or which must be maintained by a company. However, the general standard used to measure the CR of a good company is at the 200% limit. If the Current Ratio (CR) of a company is above 200% (too liquid) then the company has large amounts of idle cash. This indicates inefficient cash management. When the company's Current Ratio (CR) is low, it means the company is in a position of financial difficulty because at some point the company must pay its short-term debt. Usually the good or bad Current Ratio (CR) is also very dependent on the type of business of each company. Current Ratio (CR) which is not significant indicates that every change in CR has no effect on changes in stock prices. This shows that investors who want to invest value Current Ratio (CR).
Effect of Debt to Equity Ratio on stock prices
From the results of the partial test (t test) on the variable Debt to Equity Ratio (DER) obtained tcount of -1.0315
<ttable of 2.131 with a significant level of 0.3108> 0.05 then H1 is rejected. A negative t value indicates the relationship that the Debt to Equity Ratio (DER), then the Debt to Equity Ratio (DER) has no effect on stock prices. This is the same as research conducted by Martha M, and Meilin, L (2018) which states that the Debt to Equity Ratio has no effect on stock prices.
Jurnal Ilmiah Socio Secretum, Vol. 10, No. 1, June 2020: 80-85 in investing in Textile company shares.
Effect of Return on Equity on stock prices
From the results of the partial test (t test) on the Return On Equity (ROE) variable, it is obtained that t count is 4.2121> t table is 2.131 with a significant level of 0.0002 < 0.05 then H1 is accepted. This is the same as research conducted by Hendra Adhitya Wieaksono stating that Return On Equity (ROE) has an effect on stock prices.
Return On Equity (ROE) has an effect on stock prices, meaning that the higher the Return On Equity (ROE), the more expensive a stock will be, because Return On Equity (ROE) is a form of financial ratio to assess company performance. The results of the study that influence the Return On Equity (ROE) variable and stock prices can also be caused because the Return On Equity (ROE) ratio is an indicator of profit that is often considered by investors. The higher the ROE generated by a company, it will increase the prosperity of the company's shareholders.
CONCLUSION
Based on the discussion of the results of research that has been carried out regarding the effect of the current Ratio (CR), Debt to Equity Ratio (DER) and Return On Equity (ROE) on stock prices in Textile Companies Listed on the Indonesia Stock Exchange (IDX) in 2016-2020, Some conclusions that can be drawn from this research are: The Current Ratio (CR) variable has no partial effect on stock prices in Textile Companies listed on the Indonesia Stock Exchange in the 2016-2020 period. Due to the obtained tcount of - 1.1510 <ttable of 2.131 with a significance level of 0.2591> 0.05 then H1 is rejected. The Debt to Equity Ratio (DER) variable has no partial effect on stock prices in Textile Companies listed on the Indonesia Stock Exchange in the 2016-2020 period. Due to the obtained tcount of -1.0315 <ttable of 2.131 with a significant level of 0.3108> 0.05 then H1 is rejected. The Return On Equity (ROE) variable has no partial effect on stock prices in Textile Companies listed on the Indonesia Stock Exchange in the 2016-2020 period. obtained t count of 4.2121> t table of 2.131 with a significant level of 0.0002 <0.05 then H1 is accepted. Simultaneous/together significance test resulted in a Prob value (F-statistic) of 0.000002 < 0.05 so that the variables CR, DER and ROE together had an effect on Y.
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