International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (956-963), Month: October 2019 - March 2020, Available at: www.researchpublish.com
The Effect of Financial Performance on Stock Returns of Manufacturing Companies Listed on the Indonesia Stock Exchange Ni Komang Ning Saniardi1, Ni Gusti Putu Wirawati2, Gayatri3, I Dewa Nyoman Badera4 1234 1234
Udayana University
Faculty of Economics and Business, Bali, Indonesia
Abstract: Stock returns are rewards given by companies to investors who have invested their capital. High or low of the stock returns are influenced by CR, DER, ROE, and interest rates. The purpose of this study was to determine the effect of CR, DER, ROE, and interest rates on stock returns. This research was conducted on companies listed on the Indonesia Stock Exchange in 2016-2018. The analysis technique used is multiple linear regression analysis. The method used is purposive sampling technique. The number of samples used in this study were 188 observations. Based on the results of the analysis, that CR and ROE negatively affect stock returns, DER and interest rates have a positive effect on stock returns. Keywords: Current Ratio; Debt to Equity Ratio; Return on Equity; Interest Rates; Stock Returns.
I.
INTRODUCTION
The capital market is a meeting place for sellers (companies) and buyers (investors) to conduct transactions in order to obtain capital (Suantari and Novitasari, 2016). In the capital market, investors must choose investment alternatives very carefully because of the uncertainty of return that will be received by investors. That is because not all shares of companies that have a good profile will provide a good return as well, so a deeper analysis of the company is needed (Maulani et al., 2019). Stock return is the rate of return on investment made by investors in shares expressed as a percentage (Rahmi et al., 2019). Stock return is the value obtained as a result of investment activities or rewards given by the company to investors who have invested their capital (Nirayanti and Widhiyani, 2014). To get the return as expected, investors need to make an assessment of the company's ability to generate returns in the future (Purnamaningsih and Wirawati, 2014). Therefore, investors must be able to analyze company information so that it is not trapped in adverse conditions and investors can obtain expected stock returns. The development of the company can be reviewed by management through an assessment of financial performance using ratio analysis (Sari and Budiasih, 2014). Financial performance is the company's ability to earn profits in relation to sales, total assets, and own capital (Widyastuti, 2019). Financial performance is an analysis conducted to see the extent to which a company has carried out its duties by using the rules of financial implementation properly and correctly (Olweny, 2018). Performance is also needed by companies to evaluate and find out to what extent the company's success. Financial performance can show the effectiveness and efficiency of company performance in achieving its goals (Irfani, 2014). There are two factors that influence stock returns, namely internal factors and external factors. First is internal factors such as corporate financial statements which can be analyzed through financial ratios to measure the performance of a company. According to Herawati and Irradha Fauzia (2018), financial ratios are grouped into five types, namely the first liquidity ratio, which is the ratio that states the company's ability to meet its obligations in the short term; the second is the ratio of activities, stating the company's ability to utilize the assets it owns; third, profitability ratios, show the company's ability to generate profits, fourth solvency ratios, show the company's ability to meet long-term obligations or total
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