The effect of DER, EPS, ROE and inflation on stock returns in the construction, property and real estate companies

Abstract

Purpose: The study aims to assess the impact of financial indicators Debt to Equity Ratio (DER), Earnings Per Share (EPS), Return on Equity (ROE), and inflation on stock returns of construction, property, and real estate companies from 2015 to 2019 and categorize these companies by market capitalization (medium and small).

Method: The research uses a descriptive quantitative approach with panel data regression analysis in Eviews 11 to examine variable relationships for 49 companies over five years, utilizing 245 data points from IDX.co.id and idnfinancials.com. To evaluate the significance of the results, T-tests were performed for hypothesis testing.

Findings: EPS and ROE positively and significantly affect stock returns for medium-market capitalization companies, while DER and inflation do not. Conversely, for small-market capitalization companies, none of the indicators significantly influence stock returns.

Practical implications: Medium-market capitalization firms should enhance their EPS and ROE to boost stock returns, while small-market capitalization companies require further research to identify additional influencing factors. Policymakers need to recognize the unique challenges across different market capitalization categories.