The Effects Of Digital Maturity And Financial Performance On Stock Return: Evidence From Indonesian Tech Public Companies

Abstract

As part of the digital technology trend, many companies disclose their digital activity to measure the firm’s digital maturity to welcome new wave of datadriven digital technologies. In Indonesia, the technology sector has significant growth. Although digital technology trends are new, the technology sector is categorized as a good performer, measured by the vast stock return. Therefore, this study uses technology companies that have a high digital maturity index recorded from 2016 to 2020 with a total sample of 10 companies. Digital maturity measurement using textual quantification method or text query in the annual report. The number of digital activities mentioned is quantified using a tercilebased to avoid noise. Panel data regression is used with a Common Effect Model as well as the robustness test. The results show that digital maturity and profitability, as measured by Return-on-Asset (ROA), have no significant effect on stock returns. On the other hand, Sales Growth has a significant positive effect on stock returns. Therefore, investors and managers can consider aspects of sales growth to get a good stock return performance in technology companies. However, sales growth is susceptible to the company’s external factors, so managers must focus on variables that affect sales growth.

Keywords: Technology Companies, Digital Maturity, Profitability, Sales Growth, Stock Return