[KSCI] Korea Science Citation Index Service

http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.0885

The Effects of Profitability and Solvability on Stock Prices: Empirical Evidence from Indonesia

SHOLICHAH, Fatmawati (Faculty of Economics and Business, STIKES Bhakti Al-Qodiri)
ASFIAH, Nurul (Faculty of Economics and Business, Universitas Muhammadiyah Malang)
AMBARWATI, Titiek (Faculty of Economics and Business, Universitas Muhammadiyah Malang)
WIDAGDO, Bambang (Faculty of Economics and Business, Universitas Muhammadiyah Malang)
ULFA, Mutia (Universitas Muhammadiyah Malang)
JIHADI, M. (Faculty of Economics and Business, Universitas Muhammadiyah Malang)

Publication Information

The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 885-894 More about this Journal

Abstract

This study aims to analyze the effect of the ratio of profitability and solvability (leverage) on the variable stock price, which is mediated (intervening) by the variable dividend policy. Using the financial reports of manufacturing companies in the consumer goods sector, we take profitability data (ROA, ROE, GPM, and NPM), solvability data (DAR, LTDER, and DER), dividend policy (DPR), and stock price (closing price) from 24 companies, which were selected as samples, from 2011 to 2018. Data was analyzed using the Structural Equation Modeling (SEM) method. The results show that profitability, solvability, and dividend policy affect changes in stock prices, respectively. On the other hand, profitability and solvability do not affect dividend policy. The indirect relationship (intervening) is assessed using a single test, resulting in a dividend policy that can intervene in the relationship between profitability and stock prices but cannot mediate the relationship between solvability and stock prices. The implication of this research is to provide knowledge to investors about the importance of knowing the company's financial performance. Companies with good financial performance will easily develop because there are sufficient funds for company operations. By analyzing financial ratios, investors can get signals to decide whether to invest in the company they want.

Keywords

Profitability; Leverage; Dividend Policy; Stock Prices;

Citations & Related Records

Reference

1	Irman, M., Suwitho, S., & Fujiana, M. Y. (2020). Analysis of the effect of return on asset, current ratio, debt to equity ratio, dividend, net profit, and dividend payout ratio (DPR) on share prices of companies registered in Jakarta Islamic Index (Jii) Period 2012-2017. Procuratio: Management Scientific Journal, 8(1), 37-52.
2	Jannah, R., & Haridhi, M. (2016). The effect of dividend policy, earning volatility, and leverage on stock price volatility in nonfinancing companies listed on the Indonesia stock exchange in 2010-2014. Journal of Accounting Economics Student Scientific, 1(1), 133-148. https://media.neliti.com/media/publications/187269-ID-pengaruh-kebijakan-dividen-earning-volat.pdf
3	Junaidi, M., Sulistyo, H., & Harjanto, S. (2017). Analysis of the effect of debt policy and profitability on share prices with dividend policies and company value as mediation variables: Center for Open Science. https://doi.org/10.31219/osf.io/6us5g DOI
4	Kanakriyah, R. (2020). Dividend policy and companies' financial performance. The Journal of Asian Finance, Economics, and Business, 7(10), 531-541. https://doi.org/10.13106/jafeb.2020.vol7.no10.531 DOI
5	Kasmir. (2008). Financial statement analysis. Jakarta: Raja Grafindo Persada.
6	Lapian, Y., & Dewi, S. K. S. (2018). The role of dividend policy in mediating the effect of profitability and leverage on stock prices in manufacturing companies. E-Jurnal Manajemen Universitas Udayana, 7(2), 10. https://doi.org/10.24843/EJMUNUD.2018.v7.i02.p10 DOI
7	Lukviarman, N. (2006). Fundamentals of financial management. Padang: Andalas University Pers.
8	Mahmud, M. Z. (2020). The effect of green perceived value on buying intention with product image and company reputation as a mediator. East Java: Universitas Muhammadiyah Malang.
9	Mointi, R., & Rina, R. (2019). The influence of profitability, leverage, and growth on dividend policies of manufacturing companies listed in the Indonesia stock exchange. Economy Deposit Journal, 1(2), 33-40. https://jurnal.untan.ac.id/index.php/ejmfe/article/view/35042 DOI
10	Mery, K. N., Zulbahridar, Z., & Kurnia, P. (2017). The effect of liquidity, leverage, and profitability on firm value with dividend policy as a moderating variable in mining companies listed on the Indonesian stock exchange in 2011-2014. Riau, Indonesia: Riau University.
11	Mudzakar, M. K. (2019). Analysis of profitability of dividend policy. Muara Journal of Economics and Business, 3(1), 1-9. https://journal.untar.ac.id/index.php/jmieb/article/view/1049
12	Murhadi, W. R. (2008). Dividend policy study: Antecedents and their impact on stock prices. Journal of Management and Entrepreneurship, 10(1), 1-17. https://jurnalmanajemen.petra.ac.id/index.php/man/article/view/16788
13	Oktaryani, G. S., Sofiyah, S. A. P. I., Nyoman, N., & Bisma, I. D. G,. (2016). The effect of free cash flow and leverage on share prices with dividend policy as intervening variables. Jurnal Distribusi, 4(2), 1-14. http://distribusi.unram.ac.id/index.php/distribusi/article/view/10 DOI
14	Pattiruhu, J. R., & Paais, M. (2020). Effect of liquidity, profitability, leverage, and firm size on dividend policy. The Journal of Asian Finance, Economics, and Business, 7(10), 35-42. https://doi.org/10.13106/jafeb.2020.vol7.no10.035 DOI
15	Prayogiyanto, C. D., Mardani, R. M., & Wahono, B. (2020). Analysis of the effect of dividend policy, book value per share (BVPS), and earning volatility (Evol) on stock price volatility: Empirical study of manufacturing companies in the basic industry and chemical sector listed on the Indonesia stock exchange 2016-2018. Scientific Journal of Management Research, 9(9), 224-333. http://riset.unisma.ac.id/index.php/jrm/article/view/6281
16	Anam, B. S., Arfan, M., & Shabri, M. (2016). The effect of profitability and investment opportunity sets on cash dividend policy in manufacturing companies in Indonesia. Journal of Accounting Administration, 5(3), 20-29. http://jurnal.unsyiah.ac.id/JAA/article/view/4522
17	Agusta, R. B., Irdiana, S., & Taufik, M. (2018). Profitability, capital structure, dividend policy impacts on company share prices. Jobman: Journal of Organization and Business Management, 1(2), 101-108.
18	Ainun, M. B. (2019). Effect of dividend policy on stock prices: The study of manufacturing companies on the Indonesian stock exchange 2011-2015. AkuntabeL, 16(2), 230-237. http://journal.feb.unmul.ac.id/index.php/AKUNTABEL/article/view/5803
19	Aldini, D. A., & Andarini, S. (2018). Effect of profitability on share prices at food and beverage companies listed on the Indonesia stock exchange. Indonesian Business Journal, 8(1), 45-54. http://ejournal.upnjatim.ac.id/index.php/jbi/article/view/1070
20	Ariyanti, S., & Sulasmiyati, S. (2016). Effect of profitability and leverage on share prices: Study on construction and building companies listed on the Indonesia stock exchange period 2011-2014). Journal of Business Administration, 35(2), 181-188. http://administrasibisnis.studentjournal.ub.ac.id/index.php/jab/article/view/1384
21	Brealey, R. A., Myers, S. C, & Marcus, A. J. (2008). Fundamentals of corporate financial management. Jakarta: Erlangga.
22	Clarensia, J., Rahayu, S., Azizah, N. (2017). The effect of liquidity, profitability, sales growth, and dividend policy on stock prices: Empirical study of manufacturing companies listed on the Indonesia stock exchange 2007-2010. Journal of Accounting and Finance, 1(1), 72-88. https://journal.budiluhur.ac.id/index.php/akeu/article/view/361
23	Rohmawati, I. (2017). The effect of trading volume, dividend payout ratio, and inflation on the volatility of stock prices in companies listed in the LQ45 index 2011-2015. Journal of Education and Economics, 6(1), 38-45. http://journal.student.uny.ac.id/ojs/index.php/ekonomi/article/view/6071
24	Deitiana, T. (2011). Effect of financial ratios, sales growth, and dividends on stock prices. Journal of Business and Accounting, 13(1), 57-66. https://doi.org/10.34208/jba.v13i1.217 DOI
25	Putra, A. N. D. A., & Lestari, P. V. (2016). The effect of dividend policy, liquidity, profitability, and company size on firm value. Udayana University E-Journal Management 5(7), 23-31. https://ojs.unud.ac.id/index.php/Manajemen/article/view/20373
26	Putranto, R. C. A., Wijayanti, A., & Masitoh, E.. (2019). Effect of liquidity, profitability, solvency, and company size on stock prices of consumer goods industry companies on the Indonesia stock exchange. Publikasi IImiah, 3(4), 107-124. https://publikasiilmiah.ums.ac.id/handle/11617/10724
27	Rahmawati, N., & Amboningtyas, D. (2017). The influence of profitability and leverage to company values with dividend policies as an intervening variable in LQ 45 company listed in BEI period of 2012-2016. Journal of Management, 3(3), 133-145.
28	Rakhimsyah, L. A., & Gunawan, B. (2011). Effect of investment decisions, funding decisions, dividend policies, and interest rates on firm value. Journal of Business and Accounting, 7(1), 31-45. https://journal.trunojoyo.ac.id/infestasi/article/view/490
29	Sakia, B. (2019). The influence of dividend policies, company value, and profitability on LQ45 company share prices. Journal of Management Science and Research, 8(4), 41-63. http://jurnalmahasiswa.stiesia.ac.id/index.php/jirm/article/view/2152.
30	Saprudin, S. (2019). The effect of managerial ownership, leverage, and profitability on share prices of manufacturing companies. Journal of Information System, Applied, Management, Accounting and Research, 3(3), 19-26. http://journal.stmikjayakarta.ac.id/index.php/jisamar/article/view/101
31	Hanafi, M. M. (2018). Financial management. Indonesia: Teks Books
32	Devi, N. P. Y., & Erawati, N. M. A. (2014). The effect of managerial ownership, leverage, and firm size on dividend policy of manufacturing companies. E-Journal of Accounting, 9(3), 709-716. https://ojs.unud.ac.id/index.php/Akuntansi/article/view/9490
33	Ferdinan, A. (2000). Structural equation modeling in management research . Semarang;: Badan Penerbit Universitas Diponegoro.
34	Hair, J. F., Anderson, R. E, Babin, B. J, & Black, W. C. (2010). Multivariate data analysis: A global perspective. Upper Saddle River, NJ: Pearson.
35	Ichsan, R., & Taqwa, S. (2013). The effect of profit information, dividend policy, and profitability on the share price of companies listed on the Indonesian stock exchange. Forum for Accounting Research, 1(2), 243-258. https://doi.org/10.24036/wra.v1i2.2640 DOI
36	Imam, G. (2011). Multivariate analysis application with the IBM SPSS 19 program. Semarang: Universitas Diponegoro Publishing Agency.
37	Simbolon, L. (2018). The influence of macroeconomic factors on stock price: The case of real estate and property companies. Bingley, UK: Emerald Publishing Limited.
38	Indahsafitri, P. N., Wahono, B. A. B. S., & Muhammad, K. (2018). The effect of return on equity (ROE), net profit margin (NPM), gross profit margin (GPM), and earning per share (EPS) on stock prices: Empirical study of companies listed on the LQ 45 IDX 2013-2016. Scientific Journal of Management Research, 7(2), 67-81. https://core.ac.uk/download/pdf/229615035.pdf.
39	Indradinata, A., Suardana, I. B. R., & Darma, G. S. (2019). Determinants of the rise and fall of stock prices on the Indonesia stock exchange. Journal of Business Management, 16(2), 14-35.
40	Irianto, A. B. P., Sasongko, P. H., & Wing, W. W. (2015). Evaluation of information technology utilization models in supporting performance at PT Dirgantara Indonesia (Persero). Journal of Technical Media Technology, 10(2), 132-140.
41	Sutomo, I. (2014). Profitability ratio analysis to assess financial performance at PT Niagaraya Kreasi Lestari Banjarbaru. Journal of Kindai, 10, 295-305. https://www.academia.edu/36422224
42	Tangke, P., & Habbe, A. H. (2017). The influence of specific assets and foreign ownership on corporate sustainability by mediating corporate governance. JRAK: Journal of Accounting Research and Computerized Accounting, 8(1), 45-62. http://www.ijbmi.org/papers/Vol(4)5/A04501010.pdf
43	Zaki, M., & Islahuddin, M. S. (2017). The effect of profitability, financial leverage and company size on stock prices: Studies on manufacturing companies listed on the Indonesia stock exchange for the period 2005-2014). Journal of Accounting Administration, 6(3), 75-93. http://jurnal.unsyiah.ac.id/JAA/article/view/8969
44	Sari, P. R. K., & Salam, A. (2019). The effect of Panama Papers on the Joint Share Price Index (JCI). Journal of Management and Business, 2(1), 1-7.