Proceedings of the Fifth Annual International Conference on Business and Public Administration (AICoBPA 2022)

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The Modulating Role of Leverage in the Interplay Between Profitability and Stock Returns Within the Context of Indonesia’s Islamic Financial Landscape

Authors
Nur Imamah1, *, Tsui-Jung Lin2, Reika Happy Sugiastuti1, Salma Ramadhani1
1Business Administration Department, Brawijaya University, Malang, Indonesia
2Banking and Finance Department, Chinese Culture University, Taipei, Taiwan
*Corresponding author. Email: nurima_fia@ub.ac.id
Corresponding Author
Nur Imamah
Available Online 1 August 2023.
DOI
10.2991/978-2-38476-090-9_53How to use a DOI?
Keywords
Profitability; Leverage; Stock Returns
Abstract

During the timeframe of 2018–2021, the present research scrutinizes companies listed on the Indonesia Stock Exchange (IDX) with respect to their profitability and stock returns, while incorporating leverage as a moderating variable. The Ordinary Least Square approach is employed to model the relationships between dependent and independent variables, capturing the nuanced interplay among these financial factors. Additionally, this analysis adopts the Fixed Effect Model technique with sectional weight, offering a robust examination of the data. The findings reveal a positive, yet modest, influence of earnings per share (EPS) on stock returns. In contrast, return on equity (ROE) exerts a substantial and positive impact on stock prices. Moreover, the debt-to-equity ratio (DER) demonstrates a positive and statistically significant effect on stock returns. The debt-equity ratio serves as a notable moderator, attenuating the influence of EPS on stock returns as well as the effect of ROE on debt. Collectively, the outcomes of this study underscore the pivotal role that leverage plays in mitigating the impact of profitability on stock returns, providing valuable insights for investors, financial analysts, and industry stakeholders.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the Fifth Annual International Conference on Business and Public Administration (AICoBPA 2022)
Series
Advances in Social Science, Education and Humanities Research
Publication Date
1 August 2023
ISBN
978-2-38476-090-9
ISSN
2352-5398
DOI
10.2991/978-2-38476-090-9_53How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Nur Imamah
AU  - Tsui-Jung Lin
AU  - Reika Happy Sugiastuti
AU  - Salma Ramadhani
PY  - 2023
DA  - 2023/08/01
TI  - The Modulating Role of Leverage in the Interplay Between Profitability and Stock Returns Within the Context of Indonesia’s Islamic Financial Landscape
BT  - Proceedings of the Fifth Annual International Conference on Business and Public Administration (AICoBPA 2022)
PB  - Atlantis Press
SP  - 680
EP  - 689
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-090-9_53
DO  - 10.2991/978-2-38476-090-9_53
ID  - Imamah2023
ER  -