Research.
THE INFLUENCE OF SYSTEMATIC RISK AND LIQUIDITY ON STOCK RETURN AT MINING SECTOR COMPANIES
Wildan Hidayatullah1*;Gusganda Suria Manda2
Department of Accounting, Universitas Singaperbangsa Karawang, Indonesia
1*[email protected]; 2[email protected]
corresponding author1
Received: October 14, 2021 Accepted: December 26, 2021 Published: December 30, 2021
To cite this article: Hidayatullah, W; Manda, GS. (2021).The influence of Systematic risk and liquidity on stock return at mining sector companies. The Accounting Journal of BINANIAGA. 6 (2), 105-114 doi:
10.33062/ajb.v6i2.463
Abstract. The purpose of this research is to examine the influence of systematic risk and liquidity on stock return at mining sector companies listed in Indonesia Stock Exchange (IDX) from 2017 to 2019. The analysis method used by the author is verification by collecting data from Indonesia Stock Exchange website and Yahoo Finance. The sampling technique used is purposive sampling. This research involves 32 mining sector companies on the Indonesia Stock Exchange. The Systematic risk variable is measured by beta and the liquidity variable measured by the current ratio.
Multiple linear regression, simultaneous and partial regression is the data analysis techniques used in this research. The result of this study shows that systematic risk and liquidity simultaneously have a significant influence on stock return. Systematic risk has a negative and significant impact on the stock return and liquidity has a positive and insignificant impact on the stock return.
Keywords: Systematic Risk, Liquidity, Stock Return
INTRODUCTION
Background
Indonesia stock exchange has grown very rapidly, in line with the continued growth of world capital markets and technological advances. The investment instrument increasingly in demand by investors is an investment portfolio through the capital market.
The stock market is a market in which various long-term financial instruments can be traded in the form of equity (shares), debt, derivative instrument or other instruments (Effendi et al., 2011).
Almost all investment includes an element of uncertainty. An investor can only guess how much benefit is expected from their investment and how much the actual result will deviate from the expected results. If an investor wants to have a high rate of return, they must also be able to take high risks. According to Fahmi (2012), an investor will face systematic risk and unsystematic risk. Systematic risk is the risk that cannot be diversified or in other words, affects the whole and it is stated in beta (β). Meanwhile, unsystematic risk only affects the business in question. Factors that affect unsystematic risk include capital structure, asset structure, level of liquidity, level of profit, and so on.
Investors can also see from the level of liquidity of the company to estimate the performance and prospects of a company. According to (Abbas et al., 2015), liquidity is
the company’s ability to fulfil all financial obligation that can be disbursed immediately or that are due. Liquidity reflects the availability of funds held by the company to meet all maturing debts. The higher level of liquidity of the company signifies the better the company's short-term performance, and investors will be more confident to invest in the company. This will affect the rise in stock prices and raise the level of stock returns so investors can receive high returns and vice versa.
Things that need to be considered in addition to systematic risk and liquidity are return. Return is a profit obtained through share ownership over a certain period (Juniarta and Purbawangsa, 2020). According to Hartono (2014). Stock returns divided into the realized return and expected return. Realized return is the return that has occurred.
Historical data is used to calculate the realized return. Realized return is necessary because it is used to measure the performance of a company. Realized return is also useful to specify the risk and expected return in the future (Alexandri and Nita, 2014). So it can be simplified that realized return is a return that has occurred while expected return is a return that has not occurred.
Research conducted by Jabar and Cahyadi (2020) states that systematic risk has a positive influence on stock return, however research by Nugroho and Sukhemi (2015) found that systematic risk has a negative influence on stock return. Wijaya and Djajadikerta (2017) states that liquidity has a positive influence on stock return, different from the research of Manik (2017) which states the results that liquidity has a negative influence on stock return.
Based on the background and research gap above, the authors interested in analysing the impact on stock return so that the information obtained can be used as input to determine the tendency of investors to reject the risks and stated in a journal entitled “The Influence of Systematic Risk and Liquidity on Stock Return at Mining Sector Companies”.
Formulation of the Problem
1. How does the Systematic Risk influence the Stock Return in mining sector companies listed on the Indonesia Stock Exchange?
2. How does the Liquidity influence the Stock Return in mining sector companies listed on the Indonesia Stock Exchange?
3. How does the Systematic Risk and Liquidity affect simultaneously the Stock Return in mining sector companies listed on the Indonesia Stock Exchange?
LITERATURE REVIEW
Systematic Risk
Risk is the potential distinction between the realized return and expected return.
The higher the difference between the realized return and the expected return, the higher the investment risk (Trimulato, 2017). According to Fahmi (2012), an investor will face both systematic risk and unsystematic risk. A type of risk that cannot be diversified or otherwise affect the whole is systematic risk. Meanwhile, the risk that only affects the business concerned is an unsystematic risk. Factors that affect unsystematic risk include capital structure, asset structure, level of liquidity, level of profit and so on.
Systematic risk defined as beta (β) plays an important role in measuring the risk of securities in the diversification principle (Puspitaningtyas, 2017). According to Hartono (2014), beta (β) is a measure of the volatility of the return on a security or the return on the market of the portfolio. Beta essentially describes how sensitive security is to market
changes. Beta can be determined using a combination of the market characteristics of the securities and the fundamental factors of the company, namely asset growth, dividend payout, liquidity, leverage, asset size, earnings variability, and accounting beta.
Liquidity
Ningsih and Sari (2019) state that liquidity is the ratio used to measure the ability of a company to fulfil its short-term obligation. Liquidity shows the relationship between the company’s current assets and its current liabilities and thus a company shows its ability to fulfil the maturity of its debt (Batchimeg, 2017). A company can be said to be liquid if it can fulfil its obligations on time, but if the company is unable to fulfil its obligations on time, it can be said that the company is not liquid (Aufa, 2013).
Demirgunes (2016) defines the current ratio as the widest liquidity indicator by reducing the proportion of available current assets to meet current liabilities. The current ratio can also be described as a measure of a company’s safety margin. The equation of the current ratio is made by divide the amount of current assets with the amount of current liabilities.
Stock Return
Nurdin and Abdani (2020) define stock return as revenue expressed as a proportion of the initial investment capital. This investment income includes profits from stock trading where, if the investor makes a profit it is called capital gain and if the investor gets a loss it is called a capital loss. While according to Hartono (2014), the stock return is the result of making a stock investment. Stock return can be divided into realized return or return that has occurred and expected return or return that has not occurred but is expected to be obtained. Investors can receive returns on invested shares in the form of capital gain and dividend. Capital gain is an increase in the price of a share that provides profit or loss to investors (Pramiswari and Dewi, 2020).
Hypothesis Development
Influence of Systematic Risk on Stock Return
Beta is an indicator that affects stock returns and has a direct relationship with stock return (Supadi and Nuryanto, 2012). The increased systematic risk will cause investors to expect higher returns to cover the increased risk they face or vice versa. This has been proven by research from Paramitasari (2014), Jabar and Cahyadi (2020) which stated that systematic risk have a positive influence on stock return. The hypothesis proposed in this research is:
H1: Systematic risk has a positive influence on stock return.
Influence of Liquidity on Stock Return
Companies that manage their liquidity properly will be able to fulfil their working capital so that the operational activities of the company can run well and investors will be sure to own the share of the company. This will increase the demand for shares and increase the stock price which leads to an increase in stock return (Erari, 2014). This has been proven by research from Dewi (2016), Wijaya and Djajadikerta (2017) which stated that liquidity has a positive influence on stock return. The hypothesis proposed in this research is:
H2: Liquidity has a positive influence on stock return.
Influence of Systematic Risk and Liquidity on Stock Return
The influence of systematic risk and liquidity on stock return is that the higher the systematic risk and the higher the liquidity, the higher the stock return that will be received by investors. Research conducted by Nugroho and Sukhemi (2015), Nurfadilah and Anisa (2018) states that systematic risk and liquidity simultaneously influence stock returns. The hypothesis proposed in this research is:
H3: Systematic risk and liquidity simultaneously influence stock returns
RESEARCH METHODS
Purposive sampling is a sampling technique used by researchers. The research sample are mining sector companies listed on Indonesia Stock Exchange from 2017 to 2019. The data is obtained from Indonesia Stock Exchange (IDX) website and Yahoo Finance. The sample selection criteria in this research are as follows:
1. Mining companies listed on Indonesia Stock Exchange and publish financial statement in 2017, 2018 and 2019.
2. Mining companies listed on the Indonesia Stock Exchange and not delisted during the observation period.
3. Mining companies that publish stock prices on the date of publication.
The companies that met the criteria and were sampled in this research were 32 companies based on the sample selection criteria.
Several methods can be used to analyses the influence of systematic risk and liquidity on stock returns in mining sector companies listed on the Indonesia Stock Exchange. The author uses multiple linear regression analysis methods and hypothesis testing which consists of the coefficient of determination, simultaneous and partial test.
The equation of multiple linear regression that used in this research is as follows:
Y = a + b1X1 + b2X2 + ε Where :
Y = Stock return a = Constant
b1, b2 = Coefficient regression X1 = Systematic risk X2 = Liquidity ε = Error
RESULTS AND DISCUSSION
Multiple Linear Regression Analysis
Table 1 Multiple Linear Regression Analysis Result Coefficientsa
Model
Unstandardized
Coefficients Standardized Coefficients
Beta
t Sig.
B Std. Error
1 (Constant) .105 .093 1.126 .263
Systematic Risk -.087 .028 -.313 -3.141 .002
Liquidity .022 .050 .045 .451 .653
a. Dependent Variable: Stock Return Source: Processed data (2020)
Based on these test results, the equation of multiple linear regression is as follows:
Y = 0.105 – 0.087X1 + 0.022X2 + e The figures generated from these tests are described as follows:
1. The obtained constant value is 0.105. This shows that if systematic risk (X1) variable and liquidity (X2) variable does not exist, then the amount of accumulation of abnormal returns on stocks that occurred amounted to 0.105.
2. The regression coefficient value of the systematic risk (X1) variable is -0.087. This indicates that each increase of one unit of systematic risk as measured by beta will lead to lower stock returns of -0.087.
3. The regression coefficient value of the liquidity (X2) variable is 0.022. This indicates that each increase of one unit of liquidity will increase the stock return of 0.022.
Hypothesis Test Partial Test (T test)
Table 4 Partial Test of Systematic Risk on Stock Return Coefficientsa
Model
Unstandardized
Coefficients Standardized Coefficients
Beta
t Sig.
B Std. Error
1 (Constant) .138 .056 2.453 .016
Systematic Risk -.085 .027 -.307 -3.122 .002
a. Dependent Variable: Stock Return Source: Processed secondary data (2020)
There is a sig. value smaller than the probability value of 0.05 or a sig. value of 0.002 < 0.05, which means that H1 is rejected. Judging from the calculated T value of - 3.122 which is smaller than the T table of 1.985, the systematic risk (X1) variable doesn’t
have a direct relationship with the stock return (Y) variable. Based on this analysis, it can be concluded that systematic risk (X1) has a negative and significant influence on stock return (Y).
Table 5 Partial Test of Liquidity on Stock Return Coefficientsa
Model
Unstandardized
Coefficients Standardized Coefficients
Beta
t Sig.
B Std. Error
1 (Constant) .078 .097 .804 .423
Liquidity .002 .051 .003 .031 .975
a. Dependent Variable: Stock Return Source: Processed secondary data (2020)
Based on this test, there is a sig. value of 0.975 which is higher than the probability value of 0.05 or 0.975 > 0.05, this means that H2 is accepted. Judging from the T count value which is 0.031 which is smaller than the T table which is 1.985, then the liquidity (X2) variable doesn’t have a direct relationship with the stock return (Y) variable. Based on this analysis, it is known that the liquidity (X2) variable has a positive and insignificant influence on the stock return (Y) variable.
Simultaneous Test (F test)
Table 3 Simultaneous Test (F-test) Result ANOVAa
Model Sum of
Squares
Df Mean
Square
F Sig.
1 Regression 2.710 2 1.355 4.934 .009b
Residual 25.540 93 .275
Total 28.250 95
a. Dependent Variable: Stock Return
b. Predictors: (Constant), Liquidity, Systematic Risk Source: Processed secondary data (2020)
Based on the F-test, obtained F value of 4.934 with an F table of 3.09, then the value of F count > F table (4.934 > 3.09) with a sig. value of 0.009 which is less than the probability value of 0.05. Then it can be concluded that H3 is accepted which means simultaneously there is a significant influence of the systematic risk (X1) and liquidity (X2) on stock returns (Y).
Coefficient of Determination Test (R2)
Table 2 Coefficient of Determination Test Result Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .310a .096 .076 .52405
a. Predictors: (Constant), Liquidity, Systematic Risk Source: Processed data (2020)
Based on this test, it is shown that the R square value is 0.096, thus the influence of systematic risk and liquidity variables is 9.6%, while the remaining 90.4% is influenced by other factors not examined in this research, such as stock prices or interest rates.
Influence of Systematic Risk on Stock Return
Based on the analysis of the partial test (T-test), it is known that systematic risk has a negative and significant influence on stock returns of mining sector companies listed on Indonesia Stock Exchange with a value of T count is smaller than T table (-3.122 < 1.985) with a sig. value of 0.002.
This is due to the company’s policy of choosing to conduct debt restructuring, where the management is more careful to invest into profitable investment projects because the company will make optimal profits if it minimizes its risk, and this is also due to the factor of investors who want to get the maximum return. Investors will choose to avoid risk if they know that the risk of the company is too high and will result in a decrease in investors desire to invest in a company. As a result of avoiding risk, the demand for share in a company decreases so that the stock price drops and has an impact on the low stock return that will be received by investors.
These results are in line with the research of Nugroho and Sukhemi (2015) which states that systematic risk variables have a negative and significant influence on stock return.
Influence of Liquidity on Stock Return
Based on the analysis of the partial test (T test), it is known that liquidity has a positive influence on the stock return with a value of T count is smaller than T table (0.031
< 1.985) and a sig. value higher than 0.05 (0.975 > 0.05), which means that there is insignificant influence on stock returns of mining sector companies listed on the Indonesia Stock Exchange.
The cause of liquidity that not significantly influence stock returns is because the company can meet the operational needs of its company to fulfil its short-term obligations which the source is not the sale of shares but from current assets owned by the company.
These results are in line with the research of Aufa (2013), Nugroho and Sukhemi (2015) which stated that liquidity has positive and insignificant influence on stock return.
Influence of Systematic Risk and Liquidity on Stock Return
Based on the results of the simultaneous test (F test), it shows that systematic risk and liquidity simultaneously influence the stock returns, which can be seen from the sig.
value of 0.009 < 0.05. This research result can be seen more specifically from the results of the coefficient of determination (R square) with a value of 0.096, which means that the effect of the systematic risk and liquidity is 9.6% and the remaining 90.4% is influenced by other variables not included in this research. The results of the simultaneous test also show that many other factors deserve to be studied apart from systematic risk and liquidity which affect stock returns.
This is in line with research from Nugroho and Sukhemi (2015) which states that systematic risk and liquidity simultaneously influence stock return in manufacturing sector companies listed on Indonesia Stock Exchange, and also in line with the research of Nurfadilah and Anisa (2018) which states that systematic risk and liquidity simultaneously influence stock return at PT. Bank Muamalat Indonesia Tbk.
CONCLUSIONS AND SUGGESTIONS Conclusions
Based on the results and the previous discussion, it can be concluded that:
1. Systematic risk has a negative and significant influence on stock return. This indicates investors tend to avoid high risks and are more careful in investing. As a result, the demand for shares in a company decreases so that the stock price drops and has an impact on the low return that will be received.
2. Liquidity has a positive and insignificant influence on stock return. A company that has a high level of liquidity means that the company can fulfill all its short-term obligations, this will be able to increase the credibility of the company in the eyes of investors so that it will be able to increase stock returns.
3. Systematic risk and liquidity simultaneously have a significant influence on stock return. The influence of systematic risk and liquidity on stock return is 9.6% and the remaining 90.4% is influenced by other factors not examined in this research, such as stock prices or interest rates.
Suggestions
The limitation of this research is that only uses 32 samples of mining sector companies listed on the Indonesia Stock Exchange (IDX) from 2017 to 2019, so it cannot be generalized accurately. Therefore, further research is expected to add the research period or add other companies than mining sector companies and further research is expected to add other variables no examined in this research such as unsystematic risk, interest rate, inflation, exchange rate change, financial ratio, and firm size to examine their effect on stock return.
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