RJOAS September 2025
by Kawisana Putu Gede Wisnu Permana, Pertiwi I Dewa Ayu Eka (Faculty of Economics and Business, University of Warmadewa, Bali, Indonesia)
The urgency of this research is that the investment interest engaged by Indonesians in the capital market has increased significantly since the 1st quarter of 2023 which reached 323 trillion rupiah. To be able to guarantee investors in investing their capital, an accurate analysis is needed regarding the movement of stock prices in a company that goes public in Indonesia. The approach taken is to analyze the ratio of ratios related to stock prices such as financial performance and the size of the Company, so that this study can provide insight for users of the Company's financial statements go public. The independent variables used in this study are Return on equity, Price Earning Ratio, Company size, and debt to equity ratio. As for the dependent variable, it is the stock price. This research was conducted by analyzing companies that are included in LQ45 in 2024. The number of samples in this secondary study amounted to 45 data on the Company's annual financial statements.
Investment is now increasingly in demand by the Indonesian people as explained by the Investment Coordinating Board (BKPM) which recorded the growth in investment realization which in recent years has had a quite positive impact. It was recorded that investment realization data for the January-March period (first quarter) of 2023 amounted to IDR 328.9 trillion, an increase of 16.5% compared to the same period in 2022. The Ministry of Investment/BKPM remains optimistic about economic growth supported by investment realization in the first quarter of 2023 which reached 23.5% of the investment realization target in 2023 of IDR 1,400 trillion (kominfo.go.id).
Investment itself is an agreement on funds and other resources that is made at a certain time to get additional profits from those funds and other resources in the future. According to the book written by Tandelilin (2017), for investors, the price of a stock has an important meaning because it determines the value of their investment and the potential profit or loss they may get. If the stock price rises after an investor buys it, they can make a profit while selling it. However, if the stock price falls, investors may incur losses if they sell it.
The development of stock prices requires investors to know the extent to which the company can grow so that investors can increase confidence in a company. In addition to stock prices, information about financial statements is also needed by investors. The condition of good financial statements will later have a positive influence on stock prices. Changes in stock prices can occur in minutes or seconds, depending on the supply and demand between stock buyers and sellers (Darmaji and Fakhrudin, 2018).
The dynamics of stock prices in the context of the Republic of Indonesia reflect the complex interaction between economic, political, social and global factors. This basis is what makes investors develop a precise strategy, one of which is portfolio diversification in dealing with it.
The company size factor is also an important factor in investment considerations because companies with large assets are considered to have reached the maturity stage where large companies have more business certainty so that the accuracy of predictions about the company's future profits is higher. This certainty can certainly be the basis for investment in decision making so that this factor has a positive influence on stocks.
The results of Husnan's (2015) research show that large companies with large company shares distribution will also have a small impact on the loss of control from the dominant party over the company, so large companies tend to be more courageous to issue new shares to meet the company's needs than small companies. The research conducted by Basuki and Prawoto (2017) shows that the size of the company has a significant positive effect on the stock price. Research on the Influence of Liquidity and Company Size on Stock Prices has previously been conducted by Irmanto, (2022) the results of the study show that company size has an influence on stock prices. Apriani & Sudrajat (2020), whose results found that the size of the company (Total Assets) had a positive effect on the stock price.
Financial performance is a level of success of management in managing company resources. According to the Indonesian Accounting Association (IAI) (2015), financial performance is the effectiveness of company management in functioning and empowering all elements in the company, which means that the company's image is also higher in the eyes of outsiders. According to Hery (2015), financial performance is a formal effort to evaluate the efficiency and effectiveness of a company in generating profits and a certain cash position as a means of improving the company's operational activities.
Financial performance is an achievement achieved by a company that describes a series of financial activities in a certain period which is analyzed using financial analysis tools reported in income statements, balance sheets and capital change reports so that it can be known whether the company's financial condition is good or bad (Sucipto, 2018).
In this study, part of financial performance is measured by the return on equity ratio, Debt to equity ratio, Price earning ratio, and company size.
Return on Equity (ROE) reflects a company's ability to manage the capital invested by shareholders to generate profits. The higher the ROE, the more efficient the company will be in generating profits from each equity unit. The high ROE is a positive indication for investors because it shows the potential for strong investment returns.
The Debt to Equity Ratio (DER) indicates how much a company funds its operations and investments through debt rather than its own capital. An excessively high DER reflects greater financial risk, as the company must be able to meet debt and interest payment obligations. In contrast, a low DER indicates a company is more conservative and less risky, but may also not maximize growth potential through leverage.
The Price to Earnings Ratio (PER) provides an idea of how much investors are willing to pay for each unit of profit generated by a company. A high PER usually indicates that the market has high growth expectations for the company. However, a PER that is too high can also be a sign that the stock has been overvalued. Meanwhile, a low PER can indicate an attractive valuation (undervalued), or vice versa, that the company is facing financial challenges.
Company size is an important indicator in assessing the operational strength and durability of a business entity. Large-sized companies tend to have easier access to financing, a broad customer base, and economies of scale. However, large companies may also grow more slowly than smaller companies that are still aggressive in expansion. In financial analysis, size is often used as a control variable in regression models, due to its effect on profitability, risk, and valuation.
This research has a novelty by analyzing the latest company data to measure stock price movements measured by the ratio of ratios in independent and dependent variables so that it will help users of financial statements, especially for people who are interested in investing in the capital market as well as academics in teaching capital market and investment courses.
This study uses a problem-solving approach with a quantitative approach by focusing on the analysis of the Company's financial statements listed in LQ45.
After collecting raw data, the researcher proceeds to the testing stage according to the research methodology that is in accordance with the research based on the journal and previous research. This stage uses the latest and most accurate version of SPSS 25.
Based on the results of normality with one sample of Kolmogorov Smirnov, it can be assumed that the data in this study is normally distributed, with the value of asymp sig (2 tailed) which is the determinant has been above 0.05, or 0.067> 0.05 so that there is no uneven or extreme data that can damage the result model.
It can be seen that the results of the multicollinearity test show that there are no symptoms of multicollinearity in this study, where there are no other independent variables that affect the dependent variables. This result can be seen from the tolerance value which must be >0.1 and the VIF value which must be below 10.
In this stage of the heteroscedasticity test, it can be explained that there are no symptoms of heteroscedasticity that can be seen from the Sig value of > 0.05 where all independent variables in this study have a Sig value above 0.05. The results of this study test prove that there are no bound variables outside the model in this study.
This test aims to find out whether the residual sequence is random or forms a specific pattern that can indicate a violation of the regression assumption. The test results show the value of Asymp. Sig (2-tailed) is 0.367, which is greater than 0.05. This means that the residual in the regression model is random and does not show a specific pattern. Thus, the residual randomness assumption is met, so the regression model is feasible.
The t-test is used to test the influence of each independent variable partially on the dependent variable, in this case the stock price. The test was carried out by comparing the significance value (Sig.) with the significance level of α = 0.05. If the Sig. value < 0.05, then the variable has a significant effect on the stock price.
The value of the ROE regression coefficient was 4929.629, with a tcal value = 2.055 and Sig. = 0.046 (< 0.05). This shows that ROE has a positive and significant effect on stock prices. This means that the higher the ROE, the higher the stock price, assuming the other variables are constant.
The value of the PER regression coefficient was 597.584, with a tcal value = 2.997 and Sig. = 0.005 (< 0.05). This means that the PER has a significant positive effect on the stock price. An increase in PER tends to be followed by an increase in the stock price, indicating that investors give a higher valuation to companies with good per.
The value of the regression coefficient of SIZE was −64.529, with the value of tcal = −0.332 and Sig. = 0.742 (> 0.05). These results show that the size of the company has no significant effect on the stock price. Thus, the size of the company was not the main determining factor for the stock price in this study sample.
The value of the regression coefficient of DER was −31.043, with the value of tcal = −0.163 and Sig. = 0.871 (> 0.05). This means that the DER has no significant effect on the stock price. The high and low debt-to-equity ratio has not been proven to affect stock price movements statistically.
The proportion of variance of dependent variables that can be explained by independent variables in this research model which means, about 21.5% of data variations can be explained by this regression model. The rest came from other independent variables outside of this research model.
The regression model with 4 variables where ROE, PER, SIZE, and DER are statistically significant in explaining the variability of dependent variables, because the p value (Sig.) is 0.042 < 0.05, which means that these 4 independent variables simultaneously affect the movement of a stock price.
The results of the study show that Return on Equity (ROE) and Price Earning Ratio (PER) have a positive and significant effect on stock prices. This finding is in line with research conducted by Sari and Prasetyo (2018) which states that ROE is an important indicator in determining stock prices because it describes the company's ability to generate a return on invested capital. In addition, Hidayat and Wibowo's (2019) research also found that PER has a significant positive influence on stock prices, showing that investors pay attention to market valuations when making investment decisions.
On the other hand, company size (SIZE) and Debt to Equity Ratio (DER) do not have a significant effect on stock prices. This supports the results of research by Putri and Santoso (2020) who stated that in Indonesian capital market conditions, company size is not always the dominant factor in determining stock prices. Similarly, research by Rahman and Azizah (2017) found that capital structure measured by DER does not have a significant influence on stock prices, as investors prioritize aspects of profitability and growth prospects of companies.
Overall, the results of this study reinforce the understanding that in the context of the Indonesian capital market, financial performance and stock valuation are the main factors that affect stock prices, while company size and capital structure do not always play a significant role. Therefore, investors and management need to focus more on profitability and valuation management to increase the company's value in the capital market.
Original paper, i.e. Figures, Tables, References, and Authors' Contacts available at http://rjoas.com/issue-2025-09/article_04.pdf