Hugo Leo 11303091
BACHELOR’S DEGREE in
BUSINESS ADMINISTRATION
FACULTY OF BUSINESS AND COMMUNICATION
SWISS GERMAN UNIVERSITY The Prominence Tower
Jalan Jalur Sutera Barat No. 15, Alam Sutera Tangerang, Banten 15143 - Indonesia
July 2020
Revision after Thesis Defense on 13 July 2020
STATEMENT BY THE AUTHOR
I declare that this submission is my own work and to the best of my knowledge, it contains no material previously published or written by another person, nor material which to a substantial extent has been accepted for the award of any other degree or diploma at any educational institution, except where due acknowledgement is made in the thesis.
Hugo Leo
_______________________________________
Student Date
Approved by:
Margaretha Tiur Pasuria Lingga, SE., MM.
_______________________________________
Thesis Advisor Date
Dr. Nila Krisnawati Hidayat, SE., MM.
_______________________________________
Dean Date
ABSTRACT
THE EFFECT OF FINANCIAL RATIOS TOWARDS STOCK RETURN OF COAL MINING COMPANIES ON IDX 2014-2019
By Hugo Leo
Margaretha Tiur Pasuria Lingga, SE, MM, Advisor
SWISS GERMAN UNIVERSITY
This research aims to analyze the effect of financial ratios towards stock return of coal mining companies on IDX from the period 2014-2019. The stock return act as the dependent variable, impacted by profitability ratio, leverage ratio, liquidity ratio and activity ratio. The independent variables include ROA, ROE, and EPS as profitability ratios, DER as leverage Ratio, Current Ratio and Quick Ratio representing liquidity ratio and Total Assets Turnover as Activity Ratio. There are 18 companies in the research samples using quarterly time period during recording year of 2014- 2019 as duration time. This research used Random Effect Model (REM) as data estimation technique in the panel data regression model and utilizes Eviews10 software. The results showed that profitability ratio, leverage ratio, and liquidity ratio does not impact stock return significantly, whereas activity ratio impacted stock return significantly.
Keywords: Stock Return, Coal mining companies, ROA, ROE, EPS, DER, Total Assets Turnover, Current Assets, Quick ratio
© Copyright 2020 by Hugo Leo All rights reserved
DEDICATION
I dedicate this thesis work to my family, friends, advisor, and lecturers for their support, guidance and motivation.
ACKNOWLEDGEMENTS
Firstly, I herewith wish to bestow my utmost thankfulness to God, the almighty who gave me strength through hardships of making this research for the never ending blessings.
My mother, Yosette Verdooren and my brother, Jonathan Aldo, for their unconditional love and support throughout the thesis work.
I would like to express my gratitude and appreciation to all my lecturers in Swiss German University and especially to my thesis advisor, Ms. Margaretha Tiur Pasuria Lingga, SE., MM. for her patience, knowledge, time and without her sincere guidance, this thesis would not have been possibly completed.
Thank you to my best friends, my support system over the past decade, Samuel Noah, Hammam Fari, Adeline Vanessa, Mercy Andrea, Novini Kumala, Samuel Aripin, Sutanoto Sanjaya, Stefan Pratama Supargo, Ari Ferdiansyah, Hanif Rizki Putra, Luthfie Fadlitama and Irdam Perdana for the love, laughs, tears and immeasurable support. For the constant reminder that I will always have someone to lean on and a place to call home for the rest of my life.
TABLE OF CONTENTS
Page
STATEMENT BY THE AUTHOR ... 2
ABSTRACT ... 3
DEDICATION ... 5
ACKNOWLEDGEMENTS ... 6
TABLE OF CONTENTS ... 7
LIST OF FIGURES ... 10
LIST OF TABLES ... 11
CHAPTER 1 - INTRODUCTION ... 12
1.1 Background ... 12
1.2 Research Problem ... 15
1.3 Research Question ... 16
1.4 Research Objectives ... 16
1.5 Scope and limitation ... 16
1.6 Significance of Study ... 17
CHAPTER 2. LITERATURE REVIEW ... 18
2.1 Framework of Thinking ... 18
2.2. Stock Return ... 19
2.3 Liquidity Ratio ... 19
2.3.1 Current Ratio ... 19
2.3.2 Quick Ratio ... 20
2.4 Profitability Ratios ... 21
2.4.1 Return on Assets (ROA) ... 21
2.4.3 Earning per Share (EPS) ... 22
2.5 Leverage Ratios ... 23
2.5.1 Debt to Equity Ratio (DER) ... 23
2.6 Activity Ratio ... 23
2.6.1 Total Asset turnover (TAT) ... 24
2.7 Previous Studies ... 24
2.8 Hypothesis ... 29
CHAPTER 3- RESEARCH METHODS ... 30
3.1 Type of Study ... 30
3.2 Unit of Analysis ... 31
3.3 Population and Sampling ... 31
3.4 Operational Variable ... 32
3.5 Research Model ... 33
3.6 Data Analysis Technique ... 33
3.6.1 Multiple Regression ... 33
3.6.2 Measures of Central Tendency ... 34
3.6.3 Measures of Variability ... 35
3.6.4 Panel Data Regression Analysis ... 36
3.6.5 Selection of Panel Data Regression Estimation Model ... 38
3.6.6 Classical Assumption Test ... 39
CHAPTER 4 RESULTS AND DISCUSSIONS ... 40
4.1. Descriptive Statistics ... 41
4.2. Best Model Selection ... 44
4.3. Classical Assumption Test Result ... 46
4.4. Multiple Regression ... 47
4.5. Hypothesis ... 47
CHAPTER 5 CONCLUSION AND RECOMMENDATION ... 50
5.1. Conclusion ... 50
5.2. Recommendations ... 51
Figures Page Figure 1.1. China Coal Consumption (2007-2018) ... 13 Figure 1.2. Change in Coal Consumption as of 2015 ... 14 Figure 1.3. Stock Price of PT Adaro, Bumi Resource and Bukit Asam 2014-2019
………….………...15
Tables Page
Table 4.1 Descriptive Statistics Result of CR and QR ... 41
Table 4.2 Descriptive Statistics Result of ROA and ROE ... 41
Table 4.4 Descriptive Statistics Result of Debt to Equity Ratio (DER) ... 42
Table 4.5 Descriptive Statistics Result of Total Asset Turnover ... 43
Table 4.6 Descriptive Statistics Result of Earnings Per Share (EPS) ... 43
Table 4.7 Descriptive Statistics Result of Stock Return-Rf (ER-Rf) ... 44
Table 4.8 Chow Test Result ... 45
Table 4.9 Hausman Test Result ... 46
