Effect of leverage, firm size, and profitability on systematic risk and its implications on share price

https://doi.org/10.35912/jomabs.v1i4.2388
Published: Sep 2, 2024

Abstract:

Purpose: Palm oil plantations are among Indonesia's leading commodities that significantly contribute to the national economy. The fluctuation of stock prices in this subsector has attracted researchers' attention to understand the factors influencing it, including leverage, Firm Size, profitability, and systematic risk. This study aims to analyze the impact of leverage, Firm Size, profitability, and systematic risk on the stock prices of palm oil plantation subsector companies listed on the Indonesia Stock Exchange (IDX) during the period 2013-2023.

Research Methodology: This study utilizes panel data and applies three main regression models, namely the Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM), to evaluate the impact of the independent variables on stock prices.

Results: The findings indicate that leverage, Firm Size, profitability, and systematic risk do not have a significant impact on stock prices. Specifically, leverage does not have a significant effect on systematic risk or stock prices, Firm Size does not have a significant effect on systematic risk and stock prices, and profitability does not significantly affect systematic risk and stock prices. Systematic risk does not have a significant effect on stock price. There is no significant evidence that systematic risk mediates the impact of leverage, Firm Size, or profitability on stock prices.

Limitations: This study is limited to palm oil plantation subsector companies listed on the IDX and the period between 2013 and 2023. External factors, such as macroeconomic conditions, government policies, and environmental factors that might be more significant, have not been deeply analyzed.

Contributions: This study contributes to the literature by showing that internal variables such as leverage, Firm Size, and profitability do not always significantly affect stock prices in the context of the palm oil plantation sub-sector in Indonesia.

Keywords:
1. Leverage
2. Firm Size
3. Profitability
4. Systematic Risk
5. Stock Prices
Authors:
1 . Putri Yuniesha Nugrahani
Telkom University, Indonesia
2 . A Mukti Soma
Telkom University, Indonesia
3 . Palti Marulitua Sitorus
Telkom University, Indonesia
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How to Cite
Nugrahani, P. Y., Soma, A. M., & Sitorus, P. M. (2024). Effect of leverage, firm size, and profitability on systematic risk and its implications on share price. Journal of Multidisciplinary Academic Business Studies, 1(4), 933–951. https://doi.org/10.35912/jomabs.v1i4.2388
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Vol. 1 No. 4 (2024): August
Articles
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