Analyzing the influence of other variables

Oct 13, 2025 by pynkocean.com 92 views

Effect of Economic Value Added, Leverage, and Profit Management on Stock Returns with Dividend Policy as Moderating Variables: Empirical Study of LQ-45 Companies on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a vast array of companies listed on it. The performance of these companies is a crucial factor in determining the overall health of the stock market. One of the key performance indicators of a company is its stock return, which is a measure of the return on investment that shareholders receive. However, the factors that affect stock returns are diverse and complex, making it challenging for investors, managers, and regulators to understand the underlying dynamics.

This study aims to investigate the effect of economic value added (EVA), leverage, and profit management on stock returns in LQ-45 companies listed on the IDX during the 2006-2010 period. Additionally, this research examines the role of dividend policy as a moderating variable in the relationship between earnings management and stock returns.

Background

Stock return is a critical benchmark of company performance that is essential for investors. The factors that can affect stock returns are numerous and diverse, including the efficiency of resource management, risk levels, and company strategies. This study focuses on three main factors that are critical in determining stock returns:

*** Economic Value Added (EVA): EVA is a measure of performance that takes into account company capital costs, so as to reflect company profitability more comprehensively. It is a key indicator of a company's ability to generate value for its shareholders.

*** Leverage (Debt to Equity Ratio): The leverage ratio shows the proportion of funding from debt to equity, which can affect the risk and profitability of the company. A high leverage ratio can increase the risk of a company, but it can also increase its potential returns.

*** Profit Management: Profit management refers to the manipulation of numbers in the financial statements to achieve certain goals, for example, increasing stock returns. It is a critical aspect of a company's financial management, as it can affect the company's profitability and stock returns.

Research Methods

This study used secondary data in the form of financial statements of 101 LQ-45 companies listed on the IDX during the 2006-2010 period. The sampling technique used was purposive sampling with company criteria that are categorized as LQ-45 consecutives for 5 years and non-sacrificial categories. There are 13 companies that meet the criteria, resulting in a total of 65 observation companies.

Data analysis uses multiple linear regression methods to test the effect of independent variables on stock returns, as well as absolute difference tests to test the role of dividend policies as moderating variables. Data processing is done using SPSS software.

Research Result

The results of this study showed that:

*** Simultaneously: EVA, leverage, and profit management simultaneously have a significant effect on stock returns. This indicates that these three factors together play a crucial role in determining stock returns.

*** Partially: Partially, there is no independent variable that has a significant effect on stock returns. This suggests that the effect of each variable on stock returns is not significant when considered individually.

*** Role of Dividend Policy: Dividend policy as a moderating variable, has a significant effect on the relationship between earnings management and stock returns. This indicates that dividend policy strengthens the influence of earnings management on stock returns.

Conclusion

This study concluded that:

EVA, leverage, and earnings management together affect stock returns.
Partially, each variable does not have a significant effect on stock returns.
Dividend policy plays an important role in moderating the influence of earnings management on stock returns.

Implications

The results of this study have important implications for investors, managers, and regulators:

*** Investor: Investors can take advantage of the results of this study to understand the factors that affect stock returns. This can help them make informed investment decisions.

*** Manager: Managers can take advantage of the results of this study to develop more effective strategies in increasing stock returns. This can help them improve the performance of their companies.

** Regulator: Regulator can use the results of this study to formulate a better policy to increase transparency and accountability of public companies. This can help to improve the overall health of the stock market.

Research Development

This research can be developed by:

Analyzing the influence of other variables that have not been reviewed in this study, such as economic growth, inflation, and interest rates.
Expanding the scope of research by reviewing companies outside the LQ-45 category.
Increase the observation period to get more comprehensive results.

Keywords

Economic Value Added (EVA): A measure of performance that takes into account company capital costs.
Leverage: The proportion of funding from debt to equity.
Profit Management: The manipulation of numbers in the financial statements to achieve certain goals.
Stock Return: A measure of the return on investment that shareholders receive.
Dividend Policy: A company's policy on paying dividends to its shareholders.
LQ-45: A category of companies listed on the IDX that meet certain criteria.
Indonesia Stock Exchange (IDX): A stock exchange in Indonesia that lists a vast array of companies.
Frequently Asked Questions (FAQs) about the Effect of Economic Value Added, Leverage, and Profit Management on Stock Returns with Dividend Policy as Moderating Variables

Q: What is the main objective of this study?

A: The main objective of this study is to investigate the effect of economic value added (EVA), leverage, and profit management on stock returns in LQ-45 companies listed on the Indonesia Stock Exchange (IDX) during the 2006-2010 period. Additionally, this research examines the role of dividend policy as a moderating variable in the relationship between earnings management and stock returns.

Q: What are the key factors that affect stock returns?

A: The key factors that affect stock returns are:

Economic Value Added (EVA): A measure of performance that takes into account company capital costs.
Leverage: The proportion of funding from debt to equity.
Profit Management: The manipulation of numbers in the financial statements to achieve certain goals.

Q: How does dividend policy affect the relationship between earnings management and stock returns?

A: Dividend policy has a significant effect on the relationship between earnings management and stock returns. This indicates that dividend policy strengthens the influence of earnings management on stock returns.

Q: What are the implications of this study for investors, managers, and regulators?

A: The results of this study have important implications for investors, managers, and regulators:

Investor: Investors can take advantage of the results of this study to understand the factors that affect stock returns. This can help them make informed investment decisions.
Manager: Managers can take advantage of the results of this study to develop more effective strategies in increasing stock returns. This can help them improve the performance of their companies.
Regulator: Regulator can use the results of this study to formulate a better policy to increase transparency and accountability of public companies. This can help to improve the overall health of the stock market.

Q: What are the limitations of this study?

A: The limitations of this study are:

Sample size: The sample size of this study is limited to 101 LQ-45 companies listed on the IDX during the 2006-2010 period.
Time period: The time period of this study is limited to 5 years (2006-2010).
Variables: The variables used in this study are limited to EVA, leverage, profit management, and dividend policy.

Q: How can this study be developed further?

A: This study can be developed further by:

Analyzing the influence of other variables: Analyzing the influence of other variables that have not been reviewed in this study, such as economic growth, inflation, and interest rates.
Expanding the scope of research: Expanding the scope of research by reviewing companies outside the LQ-45 category.
Increasing the observation period: Increasing the observation period to get more comprehensive results.

Q: What are the keywords related to this study?

A: The keywords related to this study are:

Economic Value Added (EVA): A measure of performance that takes into account company capital costs.
Leverage: The proportion of funding from debt to equity.
Profit Management: The manipulation of numbers in the financial statements to achieve certain goals.
Stock Return: A measure of the return on investment that shareholders receive.
Dividend Policy: A company's policy on paying dividends to its shareholders.
LQ-45: A category of companies listed on the IDX that meet certain criteria.
Indonesia Stock Exchange (IDX): A stock exchange in Indonesia that lists a vast array of companies.