Title:
THE EFFECT OF COMPANY RISK, PROFIT GROWTH, AND FINANCIAL LEVERAGE ON STOCK RETURN AND ITS IMPLICATIONS ON EARNING RESPONSE COEFFICIENT OF FINANCIAL SECTOR COMPANIES LISTED IN INDONESIA STOCK EXCHANGE (IDX)

Authors:
Rachma Eka Putri, Zuraida and Nuraini Anzib

Abstract:
This study aims to examine the effect of corporate risk, profit growth, and financial leverage on stock returns and their implications on earning response coefficients in financial sector companies of the Indonesia Stock Exchange (IDX). The population in this study are financial sector companies on the Indonesia Stock Exchange. This study uses a purposive sampling method and the sample selected are 66 companies. The analytical method used in this study is path analysis and it employed the pooled data. The results showed that partially the company's risk and profit growth have an effect on stock returns and on the earnings response coefficient. Meanwhile, the financial leverage has no effect on stock return and earning response coefficients. In addition, the research outcome using path analysis partially shows that stock return mediates the relationship between corporate risk and earning response coefficients, and do not mediate the relationship between earning growth and financial leverage against earning response coefficients.