The Influence Of Liquid Asset To Total Asset (Lata), Non-Performing Loan (Npl), And Tier 1 Core Capital (Tier1) Ratios Towards The Stock Return Of Banking Companies In Indonesia From 2018 - 2021

Abstract

Stock is one of the most promising financial instruments, investors invest their money into stocks to seek profit and avoid losses. In the financial industry, the banking sector is one of the most promising sectors since their stock value is quite stable over the time. In Indonesia there are many banking companies who offer their stock inside the stock market which can be analysed using the fundamental analysis. To minimise the risk of losses in stock investments, a set of analytical tools can be used by investors to analyse stock. Accordingly, through this quantitative research, several financial ratios will be used as analytical tools to investigate banking sector’s annual stock return during the period of 2018 to 2021. Three financial ratios will be used as the independent variables to analyse their influence towards the variable of Stock Return. Liquid Asset to Total Asset Ratio (LATA), Non-Performing Loan Ratio (NPL), and Tier 1 Core Capital Ratio (TIER1) are the selected financial ratios for this research. The methodology for this study is using the panel data regression analysis and secondary data are used in this research. Annual stock returns from different 10 banking companies inside the financial sector will be used as the sample data, which are gathered from various sources such as the Indonesia Stock Exchange’s website, annual financial reports, and many more. The analysis results revealed that LATA and NPL ratios have a negative influence on the stock returns of banking companies. Furthermore, LATA and NPL are also significant towards the stock return variables. TIER1 ratio also has the same negative influence on stock return variable, however TIER1 does not possess any significance towards the stock return variable. The regression analysis also revealed that LATA, NPL, and TIER1 may explain 76.4% of the stock return movements. Keywords: Banking sector, banking stock, Indonesia Stock Exchange, financial ratio, fundamental analysis, Liquid Asset to Total Asset Ratio, Non-Performing Loan Ratio, Tier 1 Core Capital Ratio, stock return. Stock is one of the most promising financial instruments, investors invest their money into stocks to seek profit and avoid losses. In the financial industry, the banking sector is one of the most promising sectors since their stock value is quite stable over the time. In Indonesia there are many banking companies who offer their stock inside the stock market which can be analysed using the fundamental analysis. To minimise the risk of losses in stock investments, a set of analytical tools can be used by investors to analyse stock. Accordingly, through this quantitative research, several financial ratios will be used as analytical tools to investigate banking sector’s annual stock return during the period of 2018 to 2021. Three financial ratios will be used as the independent variables to analyse their influence towards the variable of Stock Return. Liquid Asset to Total Asset Ratio (LATA), Non-Performing Loan Ratio (NPL), and Tier 1 Core Capital Ratio (TIER1) are the selected financial ratios for this research. The methodology for this study is using the panel data regression analysis and secondary data are used in this research. Annual stock returns from different 10 banking companies inside the financial sector will be used as the sample data, which are gathered from various sources such as the Indonesia Stock Exchange’s website, annual financial reports, and many more. The analysis results revealed that LATA and NPL ratios have a negative influence on the stock returns of banking companies. Furthermore, LATA and NPL are also significant towards the stock return variables. TIER1 ratio also has the same negative influence on stock return variable, however TIER1 does not possess any significance towards the stock return variable. The regression analysis also revealed that LATA, NPL, and TIER1 may explain 76.4% of the stock return movements. Keywords: Banking sector, banking stock, Indonesia Stock Exchange, financial ratio, fundamental analysis, Liquid Asset to Total Asset Ratio, Non-Performing Loan Ratio, Tier 1 Core Capital Ratio, stock return.

Keywords: Banking sector, banking stock, Indonesia Stock Exchange, financial ratio, fundamental analysis, Liquid Asset to Total Asset Ratio, Non-Performing Loan Ratio, Tier 1 Core Capital Ratio, stock return.