Determinants of Stock Returns with Liquidity as Moderators: Empirical Study in Indonesia Stock Exchange

摘要

This study aims to analyze the factors affecting stock returns in the Indonesia Stock Exchange, by selecting a sample of 20 companies listed on the LQ 45 in the last three years. This study found that the growth of profitability as a key determinant in this study exerted positive and significant effect on stock returns, while the accrual-based earnings management did not significantly determine stock returns. The authors used two control variables namely capital expenditure and firm size, the latter served very well as a control variable otherwise the results can be misleading. As a moderating variable, liquidity significantly moderated the relationship between profitability and stock returns, further, liquidity modulated the magnitude of the effect of profitability on stock returns. Liquidity as moderating variable increased the confidence level of the accrual-based earning management, however, the end result of significance level was still above the threshold, thus liquidity did not significantly moderate the relationship between accrual-based earnings management and stock returns. The variables in this study explains 28,4% of the variation of the stock returns and the remaining 71,6% is explained by other variables outside of this study.