Determinant of earnings response coefficient on the Indonesian and Singaporean stock exchanges during the COVID-19 pandemic

  • 549 Views
  • 154 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Earnings response coefficient (ERC) is one of the important things for companies and investors, as it reflects a company’s good value. The COVID-19 pandemic, which is happening globally, has greatly affected capital market conditions and companies in general. It is necessary to examine what factors affect ERC significantly to provide an overview to the company while maintaining the good name of the company. This study aims to analyze the effect of firm growth, leverage, information asymmetry, and systematic risk on ERC with dividend payout ratios as moderating on the Indonesia Stock Exchange and Singapore Stock Exchange. The study uses a quantitative approach with secondary data in the form of companies’ annual reports. Population was made up of food and beverage and tobacco manufacturing companies in 2018–2020. It consists of 38 JASICA index companies on IDX, and 33 SGX index companies on SGX. The results showed that, firstly, leverage and systematic risk had a significant negative effect on ERC. Second, firm growth and information asymmetry have no effect on ERC. Third, dividend payout ratio can weaken a positive influence of information asymmetry on ERC. Fourth, dividend payout ratio failed to moderate a positive effect of firm growth and a negative effect of leverage and systematic risk on ERC. All variables have no significant statistical difference between the two stock exchanges. These results indicate that a company must improve the performance and quality of information; pay attention to obligations, mitigate and manage risk to obtain optimal ERC.

view full abstract hide full abstract
    • Figure 1. Summary of the movement of the average ERC value in 2018–2020
    • Table 1. Partial significance test results (t-test)
    • Conceptualization
      Niswah Baroroh, Heri Yanto, Muhammad Khafid
    • Formal Analysis
      Niswah Baroroh, Kuat Waluyo Jati
    • Funding acquisition
      Niswah Baroroh, Heri Yanto, Muhammad Khafid
    • Investigation
      Niswah Baroroh, Heri Yanto, Muhammad Khafid
    • Methodology
      Niswah Baroroh, Heri Yanto, Kuat Waluyo Jati
    • Supervision
      Niswah Baroroh, Heri Yanto, Muhammad Khafid
    • Validation
      Niswah Baroroh, Kuat Waluyo Jati
    • Writing – original draft
      Niswah Baroroh, Kuat Waluyo Jati
    • Data curation
      Heri Yanto, Kuat Waluyo Jati
    • Writing – review & editing
      Heri Yanto, Muhammad Khafid, Kuat Waluyo Jati
    • Resources
      Kuat Waluyo Jati
    • Project administration
      Dinda Ayu Setyowati
    • Software
      Dinda Ayu Setyowati
    • Visualization
      Dinda Ayu Setyowati
Related Articles

  • Determinants of financing decision: empirical evidence on manufacturing firms in Indonesia

    Sutomo Sutomo , Sugeng WahyudiORCID , Irene Rini Demi PangestutiORCID , Harjum MuharamORCID doi: http://dx.doi.org/10.21511/imfi.16(2).2019.14
    Investment Management and Financial Innovations Volume 16, 2019         Issue #2         pp. 159-170 Views: 2388 Downloads: 333 TO CITE АНОТАЦІЯ

    This study aims to contribute to the emergence of the literature focusing on exploring the factors influencing the financing decision, as well as examining the relationship between the firm size, profitability and firm growth towards the corporate debt. Questions such as how relevant firm size, profitability and firm growth to debt are, quantitatively, had not been fully answered in the business literature. The purpose of this study is to fill this large gap by examining the role of the firm size, profitability, investment and firm growth for the corporate debt. This study tries to examine the determinants of debt in the financial literature which include size, growth, business risk, and profitability in accordance with the capital structure theory, in manufacturing firms in Indonesia. The sample contained financial data from 150 firms for the period 2012–2017. The results showed that the manufacturing firms in Indonesia had high debt levels, especially the size, profitability, firm growth and profitability had proven to be the debt determinants, which also confirmed the Pecking Order Theory. This study also found that the management preference of manufacturing firms in Indonesia for risk was the risk-seeker or risk-neutral ones. This finding implies that the choice of funding sources originating from debt still provided greater returns compared to the capital cost needed due to business uncertainties.

  • The impact of Working Capital Management on shareholders’ wealth and profitability: evidence from Colombo Stock Exchange

    Wasantha PereraORCID , Pradeep Priyashantha doi: http://dx.doi.org/10.21511/imfi.15(2).2018.10
    Investment Management and Financial Innovations Volume 15, 2018         Issue #2         pp. 104-115 Views: 2314 Downloads: 479 TO CITE АНОТАЦІЯ

    The Working Capital Management (WCM) has an important role for the firm’s success or failure, because it directly affects the overall business health of the firm. This study examined the impact of WCM on profitability and shareholders’ wealth using 50 companies listed in different sectors on the Colombo Stock Exchange (CSE) for the period from 2010 to 2015. This sample represents 47% of the selected sectors of CSE. The profitability of the company is measured using gross operating profit (GOP) and shareholders wealth measured by Tobin’s Q (TQ) ratio. The WCM is measured using five independent variables namely stock holding period (SHP), debtors’ collection period (DCP), creditors’ settlement period (CSP), cash conversion circle (CCC) and current assets ratio (CAR). Further, three additional variables such as firm size (SIZE), leverage (LEV) and earning yield (EY) are employed as controlling variables to capture the impact of other performance of the companies.
    The data were analyzed using ordinary least square (OLS) and panel data regression models. These regression models reveal that there is a significant negative relationship between CCC and dependent variables (GOP & TQ). Further, this relationship has been confirmed by the major components of CCC such as SHP, DCP. Firm size also positively and significantly effects on the firm GOP while negatively effects on the TQ. Further, they revealed that there is a significant positive relationship between LEV and TQ. The study finds that the shareholders’ wealth and profitability can be increased through the efficiency of WCM.

  • Corporate governance quality, firm size and earnings management: empirical study in Indonesia Stock Exchange

    Yulia Saftiana , MukhtaruddinORCID , Krisna Winda Putri , Ika Sasti Ferina doi: http://dx.doi.org/10.21511/imfi.14(4).2017.10
    Investment Management and Financial Innovations Volume 14, 2017         Issue #4         pp. 105-120 Views: 1981 Downloads: 530 TO CITE АНОТАЦІЯ

    Earnings management (EM) is manipulation done by management in preparing financial statement in order to gain management advantages or to increase the firm value. EM can reduce the quality of financial statements because it does not show the real earning periodical. This research aims to identify the effect of good corporate governance (GCG) (institutional ownership, managerial ownership, frequency of board meetings, frequency of audit committee (AC) meetings), firm size, and leverage on the EM. Population comprises the companies in LQ 45 index of Iindonesia Stock Exchange (IDX) for the period 2010–2014. Samples of the research were taken using purposive sampling method, and the variables are tested using multiple linear regression analysis. The results of the research show that partially, only leverage has significant effect on EM, while institutional ownership, managerial ownership, frequency of board meeting, frequency of AC meetings, and firm size have no significant effect on EM, but all of the variables have simultaneously significant effect on EM. Limitations of the research are the only used 6 independent variables and 21 companies as samples of the research.

Download Preview
Close
Investment Management and Financial Innovations
Investment Management and Financial Innovations