Use more advanced methodologies

Oct 13, 2025 by pynkocean.com 4 views

Analysis of the Effect of Financial Performance on Stock Prices 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 its platform. The financial performance of these companies is a crucial factor in determining their stock prices. Investors rely heavily on financial ratios such as Capital Adequacy Ratio (CAR), Return on Assets (ROA), Net Interest Margin (NIM), and Loan to Deposit Ratio (LDR) to make informed investment decisions. However, the relationship between financial performance and stock prices is not always straightforward. In this article, we will delve into the analysis of the effect of financial performance on stock prices listed on the Indonesia Stock Exchange.

The Importance of Financial Performance in Stock Prices

Financial performance is a critical aspect of a company's overall health and stability. A good financial ratio usually reflects a healthy financial condition, which should have a positive effect on stock prices. Investors often use financial ratios to evaluate a company's ability to generate profits, manage risk, and maintain liquidity. However, the reality on the ground often shows a mismatch between financial performance and stock prices. For instance, in the period 2006-2010, many banking companies listed on the IDX showed that although their financial ratios had improved, stock prices did not always increase. Conversely, a decrease in financial ratios was also not always directly proportional to the decline in stock prices. This shows a complex relationship between financial performance and stock prices that cannot be ignored by investors.

The Research Methodology

This study aims to analyze whether there is an effect of financial performance on the share price of banking companies listed on the IDX. By using data collection techniques through the study of documentation and data analysis using multiple regression, this research will provide a deeper insight into the relationship between the two variables. The data used in this study includes financial ratios such as CAR, ROA, NIM, and LDR, as well as stock prices of banking companies listed on the IDX.

Data Analysis

Based on the data analysis conducted, there are strong indications that financial performance affects stock prices. From the ANOVA table, the value of F count is 19,181, which is greater than F table 4.76 with a significance level of 0.000, which is smaller than 0.05. This shows that variables such as CAR, ROA, NIM, and LDR simultaneously affect company stock prices.

From the coefficient table, it can be seen that the Return On Assets Risked (RORA) variable shows a significant effect on stock prices with a t value of 2,092, which is greater than T table 2.120, and a significance value of 0.058, which is greater than 0.05. This indicates that changes in Rora can significantly affect the company's share price. Meanwhile, for the CAR, NIM, ROA, and LDR variables, the value of t count is still below the T table, which means that these variables cannot be concluded to have a significant influence on stock prices.

Conclusion

This analysis illustrates that although there is a financial ratio that shows good financial conditions, it is not always a guarantee that stock prices will increase. Investors need to be more careful and consider various other factors that can affect stock prices, such as market conditions, investor perceptions, and other external factors. This shows the importance of comprehensive analysis in making investment decisions in the stock market.

Recommendations

Based on the findings of this study, we recommend that investors consider the following factors when making investment decisions:

Comprehensive analysis: Investors should conduct a thorough analysis of a company's financial performance, including its financial ratios, stock prices, and market conditions.
Risk management: Investors should consider the risks associated with investing in a particular company, including its financial stability, market volatility, and regulatory risks.
Diversification: Investors should diversify their portfolios to minimize risk and maximize returns.
Market conditions: Investors should consider the current market conditions, including economic indicators, interest rates, and inflation rates, when making investment decisions.

Limitations of the Study

This study has several limitations, including:

Sample size: The sample size of this study is limited to banking companies listed on the IDX.
Data availability: The data used in this study is limited to publicly available data, which may not be comprehensive or up-to-date.
Methodology: The methodology used in this study is limited to multiple regression analysis, which may not capture the complexity of the relationship between financial performance and stock prices.

Future Research Directions

Future research should aim to:

Expand the sample size: Future research should aim to expand the sample size to include more companies listed on the IDX.
Use more advanced methodologies: Future research should use more advanced methodologies, such as machine learning or artificial intelligence, to capture the complexity of the relationship between financial performance and stock prices.
Consider other factors: Future research should consider other factors that can affect stock prices, such as market conditions, investor perceptions, and other external factors.

Conclusion

In conclusion, this study provides evidence that financial performance affects stock prices listed on the Indonesia Stock Exchange. However, the relationship between financial performance and stock prices is complex and cannot be ignored by investors. Investors should consider various other factors that can affect stock prices, such as market conditions, investor perceptions, and other external factors. This study highlights the importance of comprehensive analysis in making investment decisions in the stock market.
Q&A: Analysis of the Effect of Financial Performance on Stock Prices on the Indonesia Stock Exchange

Introduction

In our previous article, we analyzed the effect of financial performance on stock prices listed on the Indonesia Stock Exchange (IDX). We found that financial performance has a significant impact on stock prices, but the relationship between the two is complex and cannot be ignored by investors. In this article, we will answer some of the most frequently asked questions (FAQs) related to our study.

Q: What is the significance of financial performance in stock prices?

A: Financial performance is a critical aspect of a company's overall health and stability. A good financial ratio usually reflects a healthy financial condition, which should have a positive effect on stock prices. Investors often use financial ratios to evaluate a company's ability to generate profits, manage risk, and maintain liquidity.

Q: What are the key financial ratios that affect stock prices?

A: The key financial ratios that affect stock prices include:

Capital Adequacy Ratio (CAR): This ratio measures a bank's ability to absorb potential losses.
Return on Assets (ROA): This ratio measures a company's ability to generate profits from its assets.
Net Interest Margin (NIM): This ratio measures a bank's ability to generate profits from its lending activities.
Loan to Deposit Ratio (LDR): This ratio measures a bank's ability to manage its loan portfolio.

Q: What is the relationship between financial performance and stock prices?

A: The relationship between financial performance and stock prices is complex and cannot be ignored by investors. While financial performance has a significant impact on stock prices, it is not the only factor that affects stock prices. Other factors such as market conditions, investor perceptions, and external factors can also impact stock prices.

Q: What are the limitations of this study?

A: This study has several limitations, including:

Sample size: The sample size of this study is limited to banking companies listed on the IDX.
Data availability: The data used in this study is limited to publicly available data, which may not be comprehensive or up-to-date.
Methodology: The methodology used in this study is limited to multiple regression analysis, which may not capture the complexity of the relationship between financial performance and stock prices.

Q: What are the recommendations for investors based on this study?

A: Based on this study, we recommend that investors consider the following factors when making investment decisions:

Comprehensive analysis: Investors should conduct a thorough analysis of a company's financial performance, including its financial ratios, stock prices, and market conditions.
Risk management: Investors should consider the risks associated with investing in a particular company, including its financial stability, market volatility, and regulatory risks.
Diversification: Investors should diversify their portfolios to minimize risk and maximize returns.
Market conditions: Investors should consider the current market conditions, including economic indicators, interest rates, and inflation rates, when making investment decisions.

Q: What are the future research directions based on this study?

A: Future research should aim to:

Expand the sample size: Future research should aim to expand the sample size to include more companies listed on the IDX.
Use more advanced methodologies: Future research should use more advanced methodologies, such as machine learning or artificial intelligence, to capture the complexity of the relationship between financial performance and stock prices.
Consider other factors: Future research should consider other factors that can affect stock prices, such as market conditions, investor perceptions, and other external factors.

Conclusion

In conclusion, this Q&A article provides answers to some of the most frequently asked questions related to our study on the effect of financial performance on stock prices listed on the Indonesia Stock Exchange. We hope that this article provides valuable insights for investors and researchers interested in the relationship between financial performance and stock prices.