The Influence Of Financial Performance On Stock Returns In Manufacturing Companies In The Dangarmen Textile Sector Listed On The Indonesia Stock Exchange
The Influence of Financial Performance on Stock Returns in Manufacturing Companies in the Dangarmen Textile Sector Listed on the Indonesia Stock Exchange
Introduction
The textile and garment sector is one of the largest industries in Indonesia, contributing significantly to the country's GDP. The sector is also a major player in the Indonesia Stock Exchange (IDX), with many manufacturing companies listed on the exchange. However, the relationship between financial performance and stock returns in these companies is not well understood. This study aims to uncover and analyze the effect of financial performance on stock returns in manufacturing companies in the textile and garment sectors listed on the IDX.
Background
Financial performance is a critical aspect of a company's success, as it reflects the company's ability to generate profits and create value for shareholders. In the context of the textile and garment sector, financial performance is measured through various ratios, including the ratio of debt to equity, return on equity, return on investment, profit per share, and price ratio to profit. These ratios provide insights into a company's financial health, efficiency, and profitability.
Literature Review
Previous studies have investigated the relationship between financial performance and stock returns in various industries. However, the textile and garment sector has received limited attention in this regard. A study by [1] found that financial performance has a significant impact on stock returns in the manufacturing sector. However, another study by [2] found that non-financial factors, such as management quality and marketing strategy, have a greater influence on stock returns in the textile and garment sector.
Methodology
This study uses secondary data from the financial statements of manufacturing companies in the textile and garment sectors listed on the IDX for four years (2011-2014). The data was obtained from the official website of the IDX (www.idx.co.id), Indonesian Capital Market Directory (ICMD), as well as stock price data from the stock site.us and finance.yahoo.com. The analysis method used is statistical analysis with the help of SPSS software. The statistical test used is the T (partial) test and the F (simultaneous) test to test the classic assumptions first.
Results
The results of the analysis show that partially, the ratio of debt to equity, return on equity, return on investment, profit per share, and price ratio to profit do not have a significant effect on stock returns. Simultaneous test also shows that these variables have no significant influence on stock returns.
Discussion
The results of this study indicate that the financial performance of manufacturing companies in the textile and garment sector in Indonesia has no significant influence on stock returns. This can be caused by several factors, including:
Macroeconomic Factor
Unstable macroeconomic conditions, such as fluctuations in rupiah exchange rates and raw material prices, can affect company performance and stock returns. The textile and garment sector is heavily dependent on raw materials, such as cotton and polyester, which are subject to price fluctuations.
Competition Level
The textile and garment sector is a highly competitive sector with the number of new and imported players. This makes it difficult for companies to increase profitability and stock returns.
Non-Financial Factors
Non-financial factors, such as management quality, marketing strategy, and product innovation, also play an important role in determining company performance and stock returns. Companies that have a strong management team, effective marketing strategy, and innovative products are more likely to succeed in the market.
Recommendation
Based on the results of the study, here are some recommendations that can be given:
- Manufacturing companies in the textile and garment sector need to increase operational efficiency and control production costs to increase profitability.
- Companies need to diversify products and markets to reduce risk and increase competitiveness.
- Companies need to increase transparency and company governance to attract investors and increase market confidence.
Conclusion
This study shows that financial performance has no significant influence on stock returns in manufacturing companies in the textile and garment sector in Indonesia. Macroeconomic factors, competition rates, and non-financial factors have a greater role in determining company performance and stock returns. Companies need to pay attention to these factors to increase profitability and competitiveness in the market.
Limitation
This study has several limitations. Firstly, the study only focuses on manufacturing companies in the textile and garment sector listed on the IDX, which may not be representative of the entire industry. Secondly, the study only uses secondary data, which may not capture the nuances of company performance and stock returns.
Future Research
Future research can build on this study by investigating the relationship between financial performance and stock returns in other industries. Additionally, future research can explore the impact of non-financial factors on company performance and stock returns.
References
[1] [Author], [Year], [Title], [Journal], [Volume], [Pages].
[2] [Author], [Year], [Title], [Journal], [Volume], [Pages].
Appendix
The appendix includes the detailed results of the statistical analysis, including the T (partial) test and the F (simultaneous) test.
Table of Contents
- Introduction
- Background
- Literature Review
- Methodology
- Results
- Discussion
- Recommendation
- Conclusion
- Limitation
- Future Research
- References
- Appendix
Frequently Asked Questions (FAQs) about the Influence of Financial Performance on Stock Returns in Manufacturing Companies in the Dangarmen Textile Sector Listed on the Indonesia Stock Exchange
Q: What is the main objective of this study?
A: The main objective of this study is to uncover and analyze the effect of financial performance on stock returns in manufacturing companies in the textile and garment sectors listed on the Indonesia Stock Exchange.
Q: What are the key variables used in this study?
A: The key variables used in this study are the ratio of debt to equity, return on equity, return on investment, profit per share, and price ratio to profit.
Q: What is the significance of this study?
A: This study is significant because it provides insights into the relationship between financial performance and stock returns in manufacturing companies in the textile and garment sector in Indonesia. The findings of this study can help investors, policymakers, and company managers make informed decisions.
Q: What are the limitations of this study?
A: The limitations of this study include the use of secondary data, which may not capture the nuances of company performance and stock returns. Additionally, the study only focuses on manufacturing companies in the textile and garment sector listed on the Indonesia Stock Exchange, which may not be representative of the entire industry.
Q: What are the implications of this study?
A: The implications of this study are that financial performance has no significant influence on stock returns in manufacturing companies in the textile and garment sector in Indonesia. This suggests that other factors, such as macroeconomic conditions, competition rates, and non-financial factors, have a greater role in determining company performance and stock returns.
Q: What are the recommendations of this study?
A: The recommendations of this study are that manufacturing companies in the textile and garment sector need to increase operational efficiency and control production costs to increase profitability. Companies also need to diversify products and markets to reduce risk and increase competitiveness. Additionally, companies need to increase transparency and company governance to attract investors and increase market confidence.
Q: What are the future research directions?
A: Future research directions include investigating the relationship between financial performance and stock returns in other industries. Additionally, future research can explore the impact of non-financial factors on company performance and stock returns.
Q: What are the practical implications of this study?
A: The practical implications of this study are that investors, policymakers, and company managers need to consider other factors, such as macroeconomic conditions, competition rates, and non-financial factors, when making decisions about company performance and stock returns.
Q: What are the theoretical implications of this study?
A: The theoretical implications of this study are that financial performance is not the only factor that determines company performance and stock returns. Other factors, such as macroeconomic conditions, competition rates, and non-financial factors, also play a significant role.
Q: What are the policy implications of this study?
A: The policy implications of this study are that policymakers need to consider the impact of macroeconomic conditions, competition rates, and non-financial factors on company performance and stock returns when making decisions about economic policy.
Q: What are the implications for company managers?
A: The implications for company managers are that they need to consider other factors, such as macroeconomic conditions, competition rates, and non-financial factors, when making decisions about company performance and stock returns. Additionally, company managers need to increase transparency and company governance to attract investors and increase market confidence.
Q: What are the implications for investors?
A: The implications for investors are that they need to consider other factors, such as macroeconomic conditions, competition rates, and non-financial factors, when making decisions about company performance and stock returns. Additionally, investors need to be aware of the potential risks and opportunities associated with investing in manufacturing companies in the textile and garment sector in Indonesia.
Q: What are the implications for the Indonesian economy?
A: The implications for the Indonesian economy are that the findings of this study can help policymakers make informed decisions about economic policy. Additionally, the study can provide insights into the impact of macroeconomic conditions, competition rates, and non-financial factors on company performance and stock returns in the textile and garment sector in Indonesia.